Two important components

There are two very important components when considering private lending to meet your borrowing needs. They are rate and fee’s. There are other important components like loan to value and location but today I want to talk about rate & fee’s.

The rate for a private mortgage is typically interest only for a 1 year period. I usually call these bridge loans as it helps bridge you from one situation to another. The rate determines your carrying costs for the loan. While there are various private lenders out there, the rule of thumb I advise clients is that it will be 1% per month interest only calculated monthly, which works out to 12% per year.

The next part is the fee’s. Which is the basically the cost to obtain the mortgage. Similar to high ratio loans where there is a CHMC premium, for private mortgages the fee is the lender & broker’s cost to arrange, secure and lend the money. In most cases this is added to the loan amount and then the monthly payment is based the principal amount + the fee’s. However these can be also be paid upfront and in full upon closing.

Not all private mortgages are created equal. Make sure that the rate and terms make sense to you. Also because of the rate & fee’s these are never supposed to be long term solution but short term fixes, so treat them as such.

I look forward to hearing from you in regard to your mortgage needs.

Patrick

p.s- You can click on this link to start the process whenever you are ready. Schedule your meeting with me here.

p.s.s- I should tell you that I am licensed in Nova Scotia Brokerage (2021-3000179) Broker (2021-3000180), Ontario(M18001555) & in British Columbia(BCFSA #504098).

p.s.s.s You can download my new mortgage app here