A mortgage granted to a borrower with a less-than-perfect credit report or unproven income is commonly called Sub-prime or B Lending/Mortgage. Sub-prime borrowers have either missed/late payments on outstanding debt such as credit card or loans or have undeclared income. Lenders charge a higher interest rate to compensate for potential losses from customers who may run into trouble or default.
Sub-prime lenders do not provide high-ratio mortgages (i.e., your down payment must be 20% or more of the purchase price of the home). These lenders charge a premium over traditional interest rates and usually do a much shorter term.
The purpose of getting a private mortgage, is often to get through a rough patch in time where either your income or credit has taken a hit or there is some outstanding issue. Private mortgages are set up to enable you to have the greatest chance of successfully transferring back to a prime lender within a few years. This is why private mortgages come with short terms of 1 to 2 years; it enables clients to make adjustments in their credit or income so they can get back to a traditional lender quickly.
There are additional costs associated with this short–term financing solution. These types of mortgages come with a higher interest rate than prime mortgages due to the risk the lender takes on and in most cases there are additional fees that come out of the mortgage proceeds at the time of funding.
One more thing to keep in mind, the most important criteria in private lending is the property it self. — “Our primary criteria is the condition the property is in, where it’s located and how easy it is to sell if the borrower gets into trouble. That is 80% of our criteria. If that meets, the 20% of the balance is based on the character of the client and their ability to repay.” Private Lender With VPM
Vancouver Private Mortgages