What is an Equity Mortgage or Loan?
An Equity Mortgage, also called an Equity Loan, is a mortgage that is lent based on the value of the home and the amount of equity that a home owner has in the property.
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What is an Equity Lender?There are two types of Equity Lenders:
1) The Conventional Lenders (such as the Big Banks, Credit Unions, and Monoline Lenders) 2) Private and Alternative Lenders Nowadays, due to Government regulation, most of the Conventional Lenders are unable to offer Equity Mortgages based on equity alone. Other factors, such as income and credit, must be considered. If you have great credit and great income, there are options for you to access your equity at prime rates. Please contact me today to discuss! |
Why would I need a Private Equity Mortgage?In times of need, many borrowers may not qualify for Equity Mortgages with Conventional Lenders. Job loss, health issues, loss of a family member, divorce, and life's unexpected events can sometimes lead to a reduced income and imperfect credit. In these situations, if you have equity in your home, Private and Alternative Lenders can help.
Other reasons for Private Equity Mortgages are:
Who are the Private and Alternative Lenders? |
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Private Lenders, sometimes called Alternative Lenders, are usually companies or individual investors. Some investors prefer to invest their money into Mortgage Investment Corporations (MICs), which are companies that lend on and manage a pool of mortgages. In this instance, the MIC would be the Private Lender. Some individuals may choose to lend their money individually for mortgages.
What are the Interest Rates for Private Equity Mortgages? |
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Private Equity Mortgage rates are higher than Conventional Mortgage Rates. They usually range between 6%-16%, depending on many factors, such as the loan-to-value of the mortgage, the location of the property, and the position of the mortgage (1st, 2nd, or 3rd Mortgage). Although the rates may seem high initially, they often are much lower than the interest rates that many borrowers pay for car loans and credit cards. Some Private Lenders may also allow longer amortizations or interest-only payments in order to alleviate cash flow situations for some borrowers, enabling them to get stop treading water.
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What are the costs for Private Equity Mortgages? |
Unlike Conventional Mortgages, there are extra costs associated with Private Equity Mortgages. In general, here are the fees that are incurred when obtaining Private Financing:
If there is enough equity in your home, most of these fees can be included in the new mortgage funds so that they do not have to be paid out-of-pocket. However, since an Appraisal is required to determine financing, the Appraisal Fee will need to be paid out-of-pocket.
- Lender Fees - Usually range between 0% to 10%, based on the complexity and risk of the application
- Mortgage Broker Fees - Usually range between 1% to 10%, based on the complexity of the application
- Legal Fees - In most cases, the borrower is responsible for paying for both the Lender's Legal Fees, and the borrower's own legal fees
- Appraisal Fee - An appraisal will be required, at the borrower's cost, to determine the market value of the property
- Legal Retainer/Standby Fee - Some lenders require that a fee be paid ahead of time to their Solicitor. This fee will be held in trust by the Solicitor, and will be used towards the payment of a portion of the legal fees at completion. However, if the borrower chooses not to move forward with the transaction, this fee is usually non-refundable.
If there is enough equity in your home, most of these fees can be included in the new mortgage funds so that they do not have to be paid out-of-pocket. However, since an Appraisal is required to determine financing, the Appraisal Fee will need to be paid out-of-pocket.
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How do I get a Private Equity Mortgage?Contacting a Mortgage Broker like myself is the first step to obtaining Private Financing. As a Mortgage Broker who specializes in Private Financing and Private Equity Mortgages, I work with over 60 Private and Alternative Lenders on a regular basis! Every lender has different lending guidelines and it is my job to find the right fit, at the best price, for my clients.
In our first initial conversation, we will discuss your financial situation to see if Private Financing is the best solution for you, or if there are other alternative solutions that you may not have thought about. I will then assess your needs and return to you with options. There is no obligation to proceed if you do not wish to proceed at that point. |