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Your frequently asked questions about private mortgages answered by senior Mortgage Broker, Hensey Khan.
1. What are the costs involved in a private mortgage?
Property appraisal through an appraiser that is approved by the lender. In GTA, an appraisal costs approx. $300 – $500 for a residential house. The borrower is responsible to cover the cost at the time the appraisal is done. Do not pay for an appraisal until you have a lender committed or agreed to finance your deal.
 Some lenders do not require an appraisal, but an inspection on the property.
  1. Broker fee – the fee is deducted from the mortgage money advanced at the time of closing.
  2. Lender fee – the fee is deducted from the proceeds of the mortgage.
  3. Legal fees – the fee is deducted from the proceeds at the time of closing. The borrower is responsible for paying the legal fees for both yours and the lender’s lawyer. The lender’s lawyer prepares all the mortgage approval documents, and your lawyer will review and provide all the supportive documents to the lender’s lawyer.
When borrowing privately, make sure that you choose an independent legal representative or independent legal advise, to close your deal.
2. When should i consider getting a private mortgage?
  • You are purchasing undeveloped land or a unique property that institutional lenders or trust companies are unable to provide mortgage financing because it is outside of their lending criteria. 
  • You are planning on buying a “flip” property or a home that needs renovation, and you need financing for the renovations. 
  • You have recently lost your job and you need a mortgage to help you catch up with the payments while you are job hunting. 
  • You need to access the equity in your home, but the penalty to break your current mortgage is too high. 
  • You have credit issues, such as a bankruptcy or a consumer proposal, that prevent you from getting a mortgage for the full amount that you need from an institutional lender. 
  • You need to consolidate high interest debt, but due to bruised credit, you have been turned down for refinancing. 
  • A divorce, illness or some other life changing event has had a major negative impact on your credit rating, and you need mortgage financing until you get back on your feet. 
  • You need to take out equity from your property to get you back into good standing with an existing mortgage that is in arrears, power of sale or foreclosure.
3. Are private mortgages expensive?
Yes, they can be. Private mortgages are mostly short term financing. They might be expensive, but if you use them wisely, they will help you achieve your financial goals! 
Note : Above mentioned questions and answers give you good and valuable information, but they are for information purposes only. Please call us for details or consult with an independent lawyer. Hensey Financial can be reached at 905-597-4363
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