Home to one of Canada’s most expensive housing markets, private mortgage lenders in BC can help those with bad credit, high debt, or low income to purchase or refinance a mortgage. Going with a private mortgage lender for bad credit can help bridge the gap while you work to repair your credit score. Even so, private mortgage lenders aren’t just for those with bad credit. Private lenders can even help those with a good level of income and a good credit score but were declined by the banks.
Private mortgages are lent out by private lenders, which can range from individuals to corporations set-up for mortgage financing. Whether you’re borrowing from an individual or you are getting financing from a Mortgage Investment Corporation, private mortgages are a more flexible and accommodating alternative to conventional mortgages.
To make up for the generally riskier profile of those looking to get a private mortgage, private lenders commonly require you to have a low loan-to-value ratio (LTV), which is the total debt (such as an existing mortgage or home equity line of credit) compared to the value of your home. The lower your LTV, the higher the chance the private lender has to recover money should you default on your mortgage. A good LTV ratio to have is below 60% if you are looking to get a private mortgage in BC.
Private mortgages also have higher interest rates than traditional mortgages from banks and other financial institutions, and private lenders may also charge a lending fee.
Some private mortgage lenders in British Columbia include:
|Lender||Physical Locations||Google Reviews|
|Alt Mortgages||1050 Homer Street #380, Vancouver, BC.|
|Amansad Financial||Amansad Financial does not have a physical location in British Columbia.|
|Arise Mortgage Corp.||1385 West 8th Avenue #105, Vancouver, BC.|
|Bancorp Financial||1090 West Georgia Street, Vancouver, BC.|
|Bayfield Mortgage Professionals||19909 64 Avenue #101, Langley, BC.|
|CCW Lending||5589 Byrne Road #227, Burnaby, BC.|
|Can Terra Financial||586 Leon Avenue #100, Kelowna, BC.|
|Capital Direct||555 West 8th Avenue #305, Vancouver, BC.|
|Dominion Lending Centres||Dominion Lending Centres has over 80 locations throughout British Columbia. The head office is located at 2215 Coquitlam Avenue, Port Coquitlam, BC.|
|GLM Mortgage Group||1001 West Broadway #164, Vancouver, BC.|
|Lanyard Group||2112 West Broadway, Vancouver, BC.|
|National Equity Lending Corp.||849 Homer Street, Vancouver, BC.|
|One Stop Mortgage Corp.||2564 East Hastings Street, Vancouver, BC.|
|Peoples Trust||888 Dunsmuir Street #1400, Vancouver, BC.|
|Premiere Mortgage||586 Leon Avenue, Kelowna, BC.|
|Prime Mortgage Works||1030 Yates Street, Victoria, BC.|
|Rala Investments||1200 Lynn Valley Road, North Vancouver, BC.|
|Royal Blue Solutions||828 Harbourside Drive, North Vancouver, BC.|
|SNEG Mortgage Team||601 West Broadway #400, Vancouver, BC.|
|Sand Dollar Mortgages||280 Twiggly Wiggly Road, Nanaimo, BC.|
|Sandhu Capital||997 Seymour Street #250, Vancouver, BC.|
|Silver Hill Mortgage Corp.||2902 West Broadway #202, Vancouver, BC.|
|The Mortgage Group||105-1385 West 8th Avenue, Vancouver, BC.|
|VWR Capital||19978 72 Avenue #301, Langley, BC.|
Private mortgage rates will vary from lender to lender, and they will also depend on your debt levels, home value, credit score, income, and property location. Second and third mortgages will have much higher rates than a first mortgage.
The average price of a home in Vancouver is $1 million as of February 2021. Since private lenders require you to have an adequate level of home equity, let’s say you have an LTV ratio of 60%, which means you own 40% of the home’s value.
Private mortgages can be used for debt consolidation, if you’ve been denied by other lenders, or as short-term financing. Perhaps you have recently lost your job and you cannot afford your mortgage payments to your bank. A private mortgage can be used as emergency financing to help you avoid foreclosure on your home. Most private mortgages have a term of around one year. How much would a private mortgage cost?
Private lenders commonly charge a financing fee of around 2% on the amount that you are borrowing. If you are borrowing $600,000, then you would be charged $12,000 in lending fees.
Private mortgage rates are around 5% to 6%. For a one-year term, this will mean that you will pay from $29,412 to $35,268 in interest over the year.
While upwards of $40,000 in interest and fees for a $600,000 mortgage seems quite costly for one year, it allows you to avoid the worst-case scenario of a foreclosure. Getting your finances back on track, building up your credit score, and paying down existing debt can ensure that you will have a strong exit plan to transfer over to a mortgage with a lower mortgage rate at the end of the one-year term.
The cost of a private mortgage will vary from lender to lender, which can be based on your income, credit score, and home equity. Private lenders usually charge a fee based on the amount being lent. This fee is usually around 2%. While a private mortgage will cost more than a conventional mortgage, they are usually only used as short-term temporary financing.
|Mortgage Amount||Mortgage Rate||Total Interest Cost||Total Cost||Monthly Payment|
|$600,000||6% + 2% Fees||$35,268||$47,268||$3,839|
Most banks in British Columbia require you to have a credit score of at least 600 in order to be eligible for a mortgage with them. Mortgage default insurance, which is required for mortgages with a LTV of 80% or higher with banks and B-lenders, also requires a credit score of at least 600.
Private mortgage lenders in Vancouver and British Columbia are more than happy to work with borrowers that have bad credit. BC private lenders can also lend to borrowers as soon as one day after a bankruptcy discharge, compared to traditional banks that might not touch your application until you've been discharged for at least two years.
Having a bad credit score or no credit history can even happen to borrowers with strong financial resources. For instance, missing a car loan payment or bill payment by more than 30 days can cause your credit score to drop by up to 150 points, with late payments staying on your credit report for up to six years. Even if you are financially responsible now, a few late payments made years ago can hurt your chances of qualifying for a mortgage with a major bank.
Not all borrowers looking to get a mortgage may have a Canadian credit history at all. Having no credit history can be common for those that haven't held a credit card or a loan before, such as with young adults. Recent newcomers to Canada looking to purchase their first home also might not have an established credit history in Canada, which can make it harder to get a mortgage. While most banks offer mortgages for newcomers, Vancouver private lenders and private lenders throughout BC are always open to working with those with no credit history.
As one of the most expensive cities in Canada, it’s not a surprise that Vancouver’s housing market is home to numerous private mortgage lenders in Metro Vancouver. High house prices makes the average size of a mortgage in Vancouver quite large, which in turn causes many potential borrowers to fail the mortgage stress test.
The stress test is required at federally-regulated financial institutions, such as the major banks. The stress test involves seeing if you can afford your mortgage payments and other living expenses based on your income. Larger mortgage payments, required for larger mortgage balances, will cause borrowers to fail the stress test if they’re unable to have enough income to meet the bank’s lending guidelines.
Vancouver’s Expensive Housing Market
In early 2021, the average size of a new mortgage in Vancouver was $520,839, according to CMHC data. That’s much larger than the national average mortgage of $335,462, and even larger than the average mortgage in Toronto of $499,640.
Vancouver’s larger mortgages require larger mortgage payments. In addition to Vancouver having the largest average new mortgage balances in Canada, Vancouver also has the largest average mortgage payments in the country. In early 2021, the average monthly mortgage payment in Vancouver was $1,975, compared to the national average of $1,358 and Toronto’s average of $1,866.
|City||Average New Mortgage (Q1 2021)||Average Monthly Mortgage Payment (Q1 2021)|
The high cost of mortgages in Vancouver require borrowers to have a higher level of income. However, are Vancouver incomes 45% higher than the Canadian average to make up for their higher mortgage payments?
In 2019, the average household income for homeowners in Canada was $115,400. In Vancouver, the average household income was $126,500, and it was $133,300 in Toronto. Vancouver incomes are only 9% higher than the Canadian average, yet their mortgage payments are 45% higher. Vancouver’s average income is lower than Toronto, even though Vancouver also has higher mortgage payments than Toronto. This is even worse for Vancouver renters, who had an average household income of $81,300 in 2018, over 55% lower than Vancouver homeowners.
What this means is that it is harder to qualify for a mortgage in Vancouver than the rest of the country for the average home. High housing prices and mortgages will mean that borrowers will need to have a high level of income to cover mortgage payments, yet Vancouver income levels aren’t that much higher than the national average. For renters and first-time homebuyers looking to enter the market and buy their first home, it might not be possible without a significant down payment.
Private mortgage lenders in Vancouver are perfectly positioned to help those that are struggling to get approved for a mortgage. Private lenders can help bring down your monthly expenses by making your private mortgage interest-only. Having to pay only interest can free up money for you to use for other living expenses if you can’t afford full mortgage payments.
Vancouver private lenders don’t require borrowers to pass the stress test, which means that they won’t mind high debt services ratios or low income. Not passing the stress test means that borrowers won’t qualify for CMHC insurance, and so borrowers working with a private lender will need to have a sizable down payment.
Previously known as the Financial Institutions Commission (FICOM), the BC Financial Services Authority (BCFSA) regulates the mortgage industry in BC. Private mortgage lenders do not need to be licensed if they lend out less than ten mortgages per year. Even so, private lenders normally source their mortgages through licensed mortgage brokers.The lack of licensing and regulations allows private lenders to accept homeowners even with low income or poor credit scores.
In 2020, the Government of British Columbia initiated a review of the Mortgage Brokers Act. Among the proposed changes is the elimination of the ten mortgages or less exemption from licensing. Mortgage lenders would also have a duty to borrowers, such as determining if a mortgage is suitable for a borrower.