Private Mortgage Regulations
After being declined by an institutional lender, you might ask yourself. “are there any such things as private mortgage regulations?” – the answer is “yes, well sort of”. Private mortgages must comply with certain federal legislation such as the Interest Act and provincial statutes such as the Mortgages Act and the Mortgage Brokers, Lenders and Administrators Act, but beyond that there is a lot of wiggle room.
Institutional lenders are subject to more rules and regulations than private lenders, so private lenders have more flexibility in terms of who they will qualify for loans, what rates of interest they will charge other terms of lending that may be applicable, within certain constraints.
The bottom line is, there really are no substantial private mortgage regulations, which can be good or bad. On the good side if you are rejected by an institutional lender your broker may still be able to find you money that will help you to complete your deal. The down side is that you will most likely pay a higher brokerage fee as well as higher interest.
Because of the generally low quality of service and unreliability of banks many people are finding themselves in a bind when purchasing properties. We hear horror stories of banks reneging on pre-approvals and providing misleading information to consumers about there borrowing capacity. Would be purchasers, rejected by conventional lenders, will, in desperation, often be vulnerable to exploitation by unscrupulous brokers.
For those reasons, and more, we recommend that you find a mortgage broker you can trust and work with them to ensure you will be approved before you pitch an offer to buy a property. Mortgage brokers can often get you a better deal with an institutional lender than you are able to negotiate on your own. If you must get a private mortgage a good broker will find you the best deal for your situation.