If you are looking to invest in your first property, you should know that getting a mortgage from the right place is a crucial step. There are two primary sources for acquiring funding: private lenders and traditional bank loans. Both methods work well for providing a loan, but certain key differences are worth considering.
Although investing in real estate can be exciting, and you might feel the need to fly through the process, we recommend taking the time to learn more information to help make a well-informed decision. Here are some key factors you should remain aware of:
What are a Bank Lender and a Private Lender?
Banks are responsible for taking funds from depositors and paying a very low-interest rate before lending the money out to borrowers at slightly higher rates and making a profit.
Private lenders are private corporations and individuals who provide mortgages through funding from investors, banks, or even both.
Private Lender vs. Bank Mortgage
Although banks offer distinct benefits to banking customers, they can be more challenging to deal with than private lenders. Not only are they bound by strict provincial and federal regulations, but programs set forth by governmental and quasi-governmental agencies as well.
While private lenders are also liable to provincial and federal laws, they are less regulated. In fact, they are more flexible in terms of the types of loans they make and who their customers are. For that reason, it is easier to get approved by a private lender rather than a traditional bank. Private lenders are even able to customize each loan based on internally set criteria, whether that be credit scores, loan to value ratio, or debt to income levels.
Additionally, it’s common knowledge that banks follow an extensive approval process. In other words, they look at financial histories and credit, using easily traceable and documented income sources. This creates a huge disadvantage for self-employed borrowers because it makes it difficult to find a way to qualify for bank loans. Unlike banks, private lenders are more creative when it comes to qualifying income. After hearing further explanations, they might even look past background flaws.
The Bottom Line
If you need to finance a property that is simple and straightforward, banks are going to be an excellent option for you. Even so, it is still important to remember that a private real estate lender will be more capable of financing a loan on a challenging property, especially in a shorter period. For those who would like to invest in property as quickly as possible, a private lender will be able to successfully close your loan faster, rather than making you wait for an unnecessarily long period of time before coming to a final decision.
At Grover Mortgage Group, our mortgage team does more than just provide mortgages but connects with clients on a deep, personal level. We specialize in offering many top-grade services, including purchase mortgage, mortgage finance, private mortgage, and reverse mortgage. If you live in Oakville, Ontario, make sure to reach out to us so that we can turn your dreams into reality. Call (289) 208-4469 today!
