Neighbourhood HoldingsRateSensePrivate LenderPrivate LenderTerm 1 yearStarting Rate 8.95%Starting Fee 2.00%
Three Point Capital1st mortgagePrivate LenderPrivate LenderTerm 1 - 2 yearStarting Rate 9.25%Starting Fee 2.00%
Alta West CapitalExpress 1stPrivate LenderPrivate LenderTerm 2 yearStarting Rate 9.49%Starting Fee 2.00%
Alta West CapitalFlex 1stPrivate LenderPrivate LenderTerm 1 yearStarting Rate 9.49%Starting Fee 3.50%
Neighbourhood HoldingsNational 1st MortgagePrivate LenderPrivate LenderTerm 1 yearStarting Rate 9.95%Starting Fee 1.00%
Alta West CapitalFlex BundlePrivate LenderPrivate LenderTerm 1 yearStarting Rate 9.99%Starting Fee 3.99%
VWR CapitalPrivate 1stPrivate LenderPrivate LenderTerm 1 yearStarting Rate 10.50%Starting Fee 2.00%
Vault CreditClassic 2ndPrivate LenderPrivate LenderTerm 1 yearStarting Rate 10.99%Starting Fee 3.00%
Alta West CapitalFlex 2ndPrivate LenderPrivate LenderTerm 1 yearStarting Rate 11.25%Starting Fee 4.00%
Three Point Capital2nd mortgagePrivate LenderPrivate LenderTerm 1 yearStarting Rate 11.75%Starting Fee 2.00%
- Alberta private mortgage lenders offer an alternative path for borrowers who may not qualify for traditional loans
- Private mortgage rates in Alberta are influenced by credit scores, property value and equity, and borrower income
- When choosing a private mortgage lender, consider interest rates, setup fees, early payout penalties, and the lender’s policies e.g., renewal policy
- Private mortgage lenders can offer flexible financing options and quick funding
Understanding How Private Mortgage Rates Work in Alberta
In Alberta, private mortgage rates are influenced by several factors. First, there’s the value and condition of the property. Because private mortgage lenders are more lenient with credit history and income, they place a high priority on the property itself.
As a borrower, your must have ample equity in the property, which must be well maintained. The property location is also important. Private lenders will also consider your income, assets, and your credit score when reviewing your mortgage application.
Key Factors Affecting Private Mortgage Rates
To summarize, the following factors are taken into consideration when you apply for a private mortgage in Alberta:
- Property value and location
- Property condition
- Equity or Loan-to-value (LTV)
- Borrower income
- Borrower assets
- Credit score
Understanding how these factors work can help you negotiate better terms and secure a more favourable mortgage rate.
Private Mortgages vs. Traditional Mortgages
Traditional mortgage lenders offer the most attractive mortgage rates and terms, and are the first place most people should go for a mortgage. Unfortunately, traditional lenders have the most stringent lending requirements, so not everyone is able to qualify. If you have a low credit score, can’t meet the strict income requirements, or need to secure financing quickly, a traditional lender may not be able to help.
Private mortgages aim to vill the void left by banks and other prime lenders, by accepting clients with low credit, irregular income, and other specialized needs. Because private mortgage lenders are willing to take on additional risk, they do charge higher interest rates and other fees that prime lenders don’t charge.
While private mortgages may have higher upfront costs, they offer an invaluable lifeline for those unable to secure financing through traditional channels, making a private mortgage loan or a second mortgage a viable option.
Private Mortgage Advantages
Private mortgages offer several advantages. They provide more flexible lending criteria, making them an attractive option for individuals turned down by banks. They also provide flexible repayment options.
Many borrowers are able to make interest-only payments. And their approval process is faster than the banks – borrowers are often approved within a week, and can receive expedited funding.
Private Mortgage Drawbacks
Private mortgages also have their share of drawbacks. The most notable is their higher interest rates, which can significantly increase borrowing costs. Also, the loan terms are generally shorter, so you need to have an exit strategy in place before you set up a private mortgage.
If you fail to repay your private mortgage as agreed, the risk of foreclosure is high, as private lenders tend to act fast when borrowers fail to make payments. Finally, private lenders are regulated differently than traditional lenders, offering less protection for borrowers.
Where to Find the Best Private Mortgage Lenders in Alberta
Most private mortgage lenders work through mortgage brokers. This is ideal for borrowers, who may lack the time and expertise to search for a private mortgage on their own. Here are some things your mortgage broker will consider when helping you find the right private mortgage.
- Interest rates
- Set up fees
- Borrowing conditions (LTV, term, payment options)
- Late payment fees
- Early payout penalties
- Renewal policies
Your mortgage broker will also ensure the private lender is licensed and insured. This will provide you with additional security and peace of mind.
Private Mortgage Lenders in Calgary
The following private lenders are headquartered in Calgary.
Private Mortgage Lenders in Edmonton
There aren’t a lot of private lenders headquartered in Edmonton, but don’t worry – most will lend there. Here’s the most prominent lender headquartered in Edmonton:
Caplink Financial Corporation
Edmonton-based Caplink has been in the private mortgage lending business for over 25 years. They offer residential and commercial mortgage products, including handling refinancing, bad credit, second mortgages, and foreclosures. They also can arrange mortgages in Mexico and the United States for Canadian residents who are looking to purchase vacation or rental property.
What Are the Costs Associated with Private Mortgages in Alberta?
Private mortgages cater to borrowers who may not qualify for conventional mortgage loans. However, the tradeoff is that there are additional costs associated with getting a private mortgage. Knowing these costs upfront can help you budget accordingly and avoid unexpected financial surprises.
Here’s a closer look at the various costs you can expect when taking out a private mortgage in Alberta.
Higher Interest Rates
The interest rates for private mortgages are generally higher than at banks and other prime lenders due to the increased risk associated with these loans. Not only are private mortgage rates on the high side, they can vary based on a variety of factors, including:
- The economy
- Regional housing markets
- The borrower’s risk profile
- The financial position of the individual lender
Typically, private mortgage interest rates in Alberta start a few percentage points above prime lending rates and can go up to the 14% – 18% range for second mortgages.
Fees and Charges
In addition to interest rates, private mortgages come with an array of fees and charges. While you might not end up paying all of the fees listed below, you should budget accordingly.
- Setup fee (1% to 3% of the loan amount)
- Legal fees
- Property appraisal fees
- Late payment fees
- Early payout penalties
Understanding how these fees work can help you manage your finances during the loan term.
When to Apply for a Private Mortgage in Alberta
Opting for a private mortgage is a significant decision that should be based on your individual circumstances. If you’re having trouble obtaining a mortgage with a traditional lender due to a low credit score, irregular income, or immediate financing needs, a private lender can offer tailored solutions to meet your specific borrowing needs.
But remember that private mortgages should only be considered a last resort due to their significantly higher interest rates. Here are some scenarios when you might want to consider obtaining a private mortgage.
Low Credit Score
If you have a low credit score, securing a mortgage through traditional lenders like a bank or credit union might be challenging. Thankfully, private lenders often consider more than just your credit score, focusing instead on your ability to repay the loan and the property’s value. In this scenario, there might be better options than credit unions and other financial institutions for obtaining a mortgage.
Many private lenders do not require a minimum credit score, making a private mortgage a viable solution for those with bad credit.
Self-Employed or Irregular Income
Being self-employed or having irregular income can make securing a mortgage from traditional lenders challenging. Private mortgage lenders provide financing solutions specifically designed for these individuals. Their common-sense approach to lending considers the borrower’s unique situation, making it easier for self-employed individuals to secure a mortgage.
Fast Financing Needs
When you need financing fast, private mortgage lenders can be a lifesaver. Unlike traditional banks, private lenders can approve loans significantly quicker, often within 24 to 72 hours. Furthermore, once approved, access to funds is typically processed and available within one to three weeks, making private lenders a go-to choice for borrowers facing time-sensitive situations.
Case Study: Quick Mortgage Solution Enables Calgary Business Owners to Secure Dream Home
In the bustling city of Calgary, Alberta, a couple, both thriving business owners, set their sights on purchasing a beautiful home. Despite being financially capable, they faced challenges in the mortgage process due to the time-consuming nature of traditional underwriting methods.
The client’s were ideal candidates for a B mortgage, known for its competitive rates and favourable terms for reliable borrowers. However, the time-consuming approval process of a B mortgage posed a significant obstacle, threatening to derail their home purchase plans. The need for a faster, more streamlined mortgage solution was evident.
In response to these unique challenges, the clients hired a mortgage broker who worked with a private lender to devise the following tailored mortgage plan:
- Product: 1st mortgage
- Loan Amount: $1,486,950
- Interest Rate: 8.99%
- Loan-to-Value (LTV): 63.83%
- Setup Fee: 3%
This solution provided the necessary funds with an expedited approval process, ensuring the clients could secure their desired home without the delays associated with traditional mortgage underwriting.
The swift and efficient handling of the mortgage allowed the clients to successfully purchase their dream home in Calgary. Gratified with the outcome, they were well positioned to refinance into a B mortgage within a year, aligning with their original preference for a more traditional mortgage product without compromising their immediate home-buying goals.
This case illustrates the importance of flexibility in the mortgage industry. Because a private lender understood the unique borrowing needs of business owners and was able to provide a custom solution, the clients were able to purchase their ideal home.
Navigating the Private Mortgage Application Process
The application process for a private mortgage in Alberta is intended straightforward and efficient. Unlike traditional bank applications, private mortgage applications are designed to minimize delays and avoid the in-depth scrutiny of income and credit scores. This approach often results in approvals within a week of the application.
Working with a broker can make the application process even smoother. Brokers assist with preparing documents and guide you through the journey, helping you secure the best rates and terms.
Before meeting with your broker to apply for a private mortgage, it’s a good idea have the following documentation on hand:
- Government-issued ID
- Proof of income
- Down payment confirmation
- Detailed property information
Having the proper documentation in advance can expedite the approval process and put you one step closer to securing your private mortgage.
Why You Should Work With a Mortgage Broker
Most private lenders in Alberta prefer to work with clients through a mortgage broker. An experienced mortgage broker can smooth the private mortgage application process and shop your application to several private lenders to find the best possible financing terms. They can also can also secure better rates on your behalf due to volume discounts with the lender.
Frequently Asked Questions
What is a private mortgage?
A private mortgage is a loan offered by non-traditional lenders, such as individuals or mortgage investment corporations, with different terms and payment structures than traditional bank loans.
Are private mortgages more expensive?
Private mortgages are generally more expensive than traditional ones because they come with higher interest rates and fees.
Is a private mortgage a good idea?
Private mortgages might come with higher interest rates than banks or credit unions, as private lenders are less concerned about credit scores and more about the security’s value, so weighing the pros and cons is important. It’s important to consider all options before making a decision.