Your mortgage is a serious matter, and possibly one of the most important loans that you’ll ever take out.
That’s why it’s understandable how many people are still suspicious about private loans. They think that only big banks and corporations can lend you money, and only they can give you enough guarantees to keep your mind at peace.
Although banks have their pros regarding loans, there’s no denying that private lenders can be a much better solution for most people and they are often as safe as banks.
So, in this article, we’re going to go over some popular beliefs that some people have about private lenders, which are usually completely wrong.
4 Common Misconceptions About Private Lenders
1. Private lenders aren’t trustworthy
This is arguably the most common one, as people tend to associate “private lenders” with “scams.” While that could happen on rare occasions, it couldn’t be further from the truth as these private lenders must be legally licensed mortgage brokers.
As well, when you get private loans, you’re secured by the borrower’s property as collateral. In fact, private lenders are regulated by provincial lending laws, and they also need to sign a Mortgage Commitment letter that has been previously drafted by a lawyer.
2. Private loans are the last option for desperate borrowers
This is also a misconception, as more people are leaning toward private lenders rather than banks for many different reasons.
This myth probably comes from the fact that private lenders consider a property’s overall value as opposed to the borrower’s credit history and finances.
So, private lenders are willing to overlook financial shortcomings in a deal if the equity is sufficient. Most private lenders are also successful individuals or businesses with a great financial situation or investment opportunity that does not conform to the strict requirements of banks.
3. Private loans are expensive
Private lenders are successful business people who are willing to invest their own money in loans they believe will provide the best possible ROI.
Because of that, they can make decisions and changes about the loans directly and make it as inexpensive or expensive as they deem, so you can come to an agreement to better suit your budget.
4. Private lenders approve risky loans
This is also not true. It is true though, as we mentioned earlier, that private lender are willing to overlook some shortcomings such as your credit score if the deal is good for them. However, if the loan is too risky, there’s a high chance that they won’t consider it.
A private lender will typically only approve loans against properties that they are able to ascertain the value of with a degree of confidence, no matter how financially solid or experienced the borrower appears to be.
Although we understand how this myth came about as private lenders tend to accept riskier loans that banks would never agree upon.
Contact the Experts at Northwood Mortgage
Now that you know more about private lenders than the average borrower, you understand how private loans can be a lifeline if you can’t get a bank to accept one.
We’re one of the GTA’s largest brokerage firms, providing unmatched service while ensuring complete customer satisfaction and the best mortgage rates in Ontario.
For more information about private loans and the best mortgage rates in Ontario, call Northwood Mortgage today at 888-492-3690 or get in touch with us here.