We Can Help You Get Approved For A Mortgage Even When Your Bank Won't!
Private Mortgage Loans
A private mortgage is an alternative source of financing given to a borrower by a private lender, and is usually sought after when a traditional bank or lending institution will not approve a borrower for a mortgage or a home refinance loan. They are usually short-term interest-only loans ranging from 6 months to 3 years. At Clover, our experienced mortgage agents specialize in finding the best private lender who will offer you the right option for your needs and specific financial situation.
Private lenders understand that the guidelines used by the banks and other traditional lending institutions are too stringent, and that in many cases banks turn away borrowers who are perfectly capable of paying back their mortgages. Unlike banks, private lenders place a larger focus on the value and over condition of the property, instead of simply looking at the borrower’s credit and income.
Why turn to a private mortgage lender?
There are many reasons why borrowers require the help or a private lender. Here are some of the most common reasons why you would turn to Clover Mortgage for a private mortgage :
- You need the money quickly and are not able to go through a very long approval process and risk not being approved.
- You have poor or bad credit and a bank or conventional lending institution won’t approve you.
- You have an untraditional way of declaring your income, or you are self employed and the bank is not considering all of your income.
- You are buying a non-traditional property that a conventional bank or institutional lender will not give a mortgage for.
- You only need a short term loan.
Types of private mortgage lenders
Here are the 3 most common types of private lenders:
Individual lenders: When an individual is investing their own personal money towards private lending, they are considered to be an individual lender.
Syndicate investors: When a group of investors invest their personal funds as a group into one mortgage, it is considers a syndicate mortgage.
Mortgage investment corporation (MIC): When a group of investors pool together their personal funds and make them available to invest into several different mortgages at simultaneously, provided that the borrowers meet specific criteria to qualify for the loan, this is known and a Mortgage Investment Corp.
What are the different payment options for a private mortgage?
With most private mortgages, the borrower only needs to make the monthly interest payments instead of a blended monthly payment that includes both interest and principal. This helps keep the monthly payments lower and more affordable.
In some cases you can even choose to have no monthly payments at all by either pre-paying all of the interest when the loan is originally funded and having that amount deducted from the total loan amount.
You can also choose to defer all of the monthly interest payments until the very end of your loan term, this is called an accrued interest private mortgage.
A less common option is an amortized blended payment plan that allows you to to blend both interest and principle into the monthly payments, similar to a more traditional mortgage, so that you can build up additional equity in your home. With a blended amortized private mortgage you can have the payments calculated based on an amortization term for as long as 40 years in order to keep the monthly payments lower.
How long can I get a private mortgage for?
Most private mortgages are short-term loans lasting as little as 1 month to as long as 3 years. This means that at the end of the term the full amount of the mortgage will be due, or you may have the option to renew the mortgage with the current lender. Repayment of a private mortgage is usually done by refinancing the entire private mortgage with a different lending partner.
At Clover Mortgage, our goal is to help create a plan that will help you get out of your private mortgage as quickly as possible and into a more traditional mortgage at a much lower interest rate. We will even help you find the right lender as your private mortgage approaches the end of the term.
What is the mortgage rate for a private mortgage?
Interest rates for a private mortgage depend on a variety of factors including the loan amount, the value of the property, the location of the property, and other factors. Private mortgage interest rates start as low as 5.5% to as high as 13% for a private first mortgage and as low as 6.99% to as high as 18% for a private second mortgage depending on the different factors that matter to the specific lender.
Individual private investors typically have the ability to offer better interest rates than a MIC because a MIC needs to provide a higher rate of return to their investors while also leaving extra interest to pay themselves.
Since private lender usually charge higher interest rates than conventional mortgage lender, borrowers would only seek out a private lender when they get turned down by the banks and by other alternative lenders such as Duca Credit Union, Equitable Bank, or Hometrust.
How do I calculate the interest and my payments for a private mortgage
Here is a simple example that will illustrate how you can calculate what your interest payments will be on a private mortgage loan.
Let’s pretend that you are a homeowner and you need to borrow $300,000 to buy or refinance your property that is valued at $400,000 and the bank turned you down because you either have poor credit or are self-employed and have a non-traditional way of declaring your income. You came to Clover Mortgage and we shopped around for the best private mortgage rate and were able to get you approved for 5.5% on a private first mortgage for a 1-year term with interest only payments. To calculate how much your monthly payments would be, you would use the following simple formula:
These calculations show that at the end of the 1 year term you would have paid a total of $16,500 of interest by making 12 monthly payments of $1,375 a month. You would still owe the entire $300,000 in principal back to the lender and Clover Mortgage will help you either refinance at a better rate or renew. We typically recommend starting the renewal or refinancing process 3 to 4 months before the end of your mortgage term so that we have enough time to find a lender that will offer the best possible solution to you given your updated financial situation.
If you have a credit score that is below 580/600, you are likely not going to be approved by a prime lender like a bank, and even institutional bad credit lenders will likely deny you a mortgage. Luckily you can turn to private lenders who provide many different mortgage solutions for clients who have bruised credit, bad credit, and even horrible credit. Clover Mortgage can help you find the best private lender for your specific financial situation that will provide you with the most competitive rate, though it will be higher than what you would get form a bank if you were to have a very strong credit history.
What are the fees involved with getting a private mortgage?
Banks and other institutional lenders pay Mortgage Brokers a commission on every mortgage that the brokerage gets funded from them. Private lenders, however, do not pay the brokerage any commission and therefore that fee is passed along to you. Also, because private mortgages typically carry more risks to the lenders, private lenders will charge an additional lender fee to the borrower along with a small legal fee incurred by the lender. Depending on the loan amount, the borrower might be required to use the assistance of their own lawyer to represent them in the transaction.
The total fees that you can expect, including the lender and broker fees, but excluding the legal fees can range from a little as 2% to as much as 10% of the total loan amount, depending on the size of the loan, the complexity of the deal, and the risk to the lender.
The good news is that in most cases, these fees are subtracted from the loan when it is funded to ensure that you do not go out of pocket to pay for these costs.
For example, if you are applying for a $100,000 private first or second mortgage and the lender and broker fee is 4% in total, plus the legal costs amount to $2,000, then your total closing costs on the mortgage would be $6,000. In order to cover these costs, you would simply apply for a mortgage of $106,000 instead of $100,000, so that all of the closing costs are paid directly by the loan rather than out of your pocket.
Specialties of private mortgage lenders
Today’s private lenders tend to specialize in specific types of loans and lending categories. Here are some of the most common areas that private lenders specialize in:
- Commercial mortgages: Clover works with many different private lenders. Some of our lenders specialize in commercial mortgages and lending. Although many private lenders who specialize in residential lending will also lend for certain commercial properties, larger or more complex commercial deals will require a lender who specializes and focuses on commercial lending.
- Residential mortgage: Similarly to commercial lenders, even though many private commercial lenders will also give private mortgage for residential properties, the more complex residential mortgage deals will require working with a lender who specializes in residential real estate lending
- Refinancing for debt consolidation: Some lenders get so specific that they will specialize in refinancing mortgage and granting equity based loans solely for the purposes of debt consolidation.
- Refinancing for renovations: Some lenders specialize in loaning out money to be used specifically for renovating a home or commercial property
- Refinancing for purchasing additional properties: Some private lenders might only provide refinancing loans to people who intend to use the funds to buy an additional property.
- Construction financing: Some lenders specialize in providing construction loans for either personal or commercial purposes.
- Urban areas vs non-urban markets: Many private lenders prefer to lend for private mortgages or home home refinancing for properties located in urban areas because they feel that in the event of a power of sale, they will be able to sell the property with more ease. Other private lenders will only lend in non- urban areas because they feel that they have more leverage and less competition standing in their way.
How quickly can I get my private mortgage loan?
Unlike a traditional mortgage from a bank which can take many weeks or even months to get approved and funded, an approval for a private mortgage can take less than a day in some cases and in certain situations you can have your money within 48 hours if it’s a simpler deal. The average length of time that it takes to get approved and funded by a private lender is from a few days to up to 3 weeks on average.
The goal of a private mortgage lender is to have the borrower improve their situation over the term of the mortgage and be in a position to refinance the entire private mortgage to a prime or more traditional lending institution. Since these loans are short-term loans, and private lenders are not nearly as regulated as the banks are, private mortgage lenders are able to make much faster financing deals, but they also want to be able to collect their return on investment in a much shorter period of time. This is why in many cases these lenders will try to work to help their borrowers move into a better financial position to be able to transition on to a prime lender.
What do I need to be able to qualify for a private mortgage?
Private lenders will give a mortgage on deals that banks see as being too risky. Because of these risk factors, these lenders place an emphasis on different factors than the banks do.
Here are what most private lenders deem to be important factors when analyzing a potential borrower and the mortgage that they are requesting:
Property value and type of property being mortgaged: To most private lenders this is the single most important factor that a private lender considers when determining whether or not they should approve a borrower for a private mortgage. The property value, type, and condition all play a role in minimizing the risk to the lender, especially if the borrower has bad credit or poor credit, and helps ensure that the private lender will be able to recoup his investment.
In order to pass this test, the property should be in good condition and in most cases a third party appraisal is required, thought certain lenders that Clover Mortgage works with will forgo a formal appraisal and are willing to conduct a physical inspection themselves if the loan to value is low enough. This will help expedite the process and will end up saving you on the appraisal costs.
Down payment and loan to value (LTV) for new purchases: In most cases private lenders will not give a mortgage on a property that has a loan-to-value that is higher than 85% which means that you will need to have at least 15% available to put as a down payment for the property. In fact, many private mortgage lenders will not go higher than 75% or 80% LTV. At Clover Mortgage, we have built long lasting strong relationships with several private lenders who will give a private mortgage on properties with a loan-to-value as high as 90%.
If you have the ability to invest a larger down payment then it is usually recommend that you do so to save on costly interest payments. A larger investment from your part also shows the lender that you are willing to have more “skin in the game” and therefore it makes the private lender feel more confident in granting your a private mortgage at a lower interest rate. The lower the risk to the lender, the lower the interest rate and fees become, therefore it is usually advisable to provide a larger down payment if you can afford it.
Equity available for refinancing or second mortgages: When refinancing your property or adding a second mortgage or third mortgage private lenders will allow you to go as high as 85% loan-to-value in some cases, though most private mortgage lenders will only refinance up to 80%. Because Clover Mortgage has many established relationship with some of Canada’s leading private lenders, several of the private lenders who we work with will refinance and provide 2nd and 3rd mortgages up to 90% loan-to-value. For example if your property is worth $500,000 and you wish to refinance $400,000 then you will be finance up to 80% loan-to-value (a private mortgage loan of $400,000 is 80% of the total value of the $500,000 property).
Income (ability to make the monthly payments): Unlike banks, private mortgage lenders are much more accepting of both conventional income and less conventional income such as self employed workers or business owners, or commission based employees who report their earnings in non-traditional ways. Conventional income often times comes in the form of a regular annual salary or hourly wage and can be proven using the borrower’s Notice of Assessment (NOA), paystubs, and T4’s. Since non-traditional income is reported differently, it can be a little more difficult to show proof of income and the lenders need to accept certain estimates using a variety of information that banks tend to shy away from.
My bank put me in a collateral charge mortgage. Can I still qualify for a private mortgage loan?
Over the past few years banks have been increasingly pushing their customers into collateral charged mortgages. What this mean is that even though the bank may have only given you a mortgage of $300,000 on a home that is worth $400,000, they registered your loan as being in the full amount of $400,000 or sometimes even more than the current value of the property.
This added security for the bank ensures that you won’t be able to get a second private mortgage anywhere else unless the value of your property grows tremendously. This means that you are most likely stuck only being able to turn to your bank when you need to refinance or take out additional money using the equity that you have in your home.
Why Work With Us
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*Rates are subject to change. Terms and conditions may apply.
We pride ourselves on quick, easy & honest service. Our clients always come first.
We specialize in dealing with bad credit & bank declines. We turn a “no” into a “YES!”
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*Rates are subject to change. Terms and conditions may apply.
Our Customers Love Us
I was in debt and needed help getting back on track. My mortgage agent at Clover Mortgage helped me get approved for a home equity loan to consolidate all of my debt in one small monthly payment. Now I’m saving over $1,000 a month in interest and am left with less debt and more money in my pocket at the end of each month. Thank you Clover!
I’m a self employed independent contractor. I earn a decent income, but when I went to the bank to refinance my home, they denied my application telling me that I didn’t have enough “provable” income to qualify for refinancing my home. When I came to Clover I was almost out of hope. My Mortgage Agent at Clover was caring and professional, and help me get a great rate and flexible terms on full refinance. The whole process took less than 48 hours! I was impressed at how quickly and easily they were able to get me the money and home refinance I needed. Thank you Clover Mortgage, I’m recommending you to everyone I know!!
I had really bad credit, but really wanted to purchase a Condo. When I went to the bank they made me go through a lengthy application process that took weeks, and then they turned me down at the end of it all. When I found Clover Mortgage online, I called them and a friendly Mortgage Agent was able to help me get approved for a mortgage quickly and hassle-free. I got a good rate and now live in a home that I am comfortable in and am able to easily afford my monthly payments.
I definitely recommend Clover Mortgage to any new home buyer! They were very professional and helped my husband and I get mortgage for our new home at an even better rate than the bank was offering us. They also helped us get the mortgage with a smaller down-payment than the bank demanded from us. Since we did our mortgage with Clover, several of our friends and family members got their from them also, and Clover Mortgage has been able to help all of them, even the ones that were completely turned away and rejected by their banks.
My husband and I found ourselves in a tough situation. Luckily my expert mortgage broker at Clover Mortgage helped us get a fast and easy approval for an amazing rate for refinancing our home. Clover’s service is the best I’ve ever experienced and I’ve been recommending them to all of my family members and friends ever since. Thanks for your help Clover!
I definitely recommend Clover Mortgage to any new home buyer! They were very professional and helped my wife and I get mortgage for our new home at an even better rate than the bank was offering us. They also helped us get the mortgage with a smaller down-payment than the bank demanded from us. Since we did our mortgage with Clover, several of our friends and family members got their from them also, and Clover Mortgage has been able to help all of them, even the ones that were completely turned away and rejected by their banks.