How to Become a Private Mortgage Lender
Private lenders have always had their niche market. Traditionally, those using private lenders were individuals who are purchasing properties that are unique and don’t meet traditional lending guidelines (eg., Tiny home), who have bad credit, can’t prove their income, new to Canada and more.
However, now we are seeing more and more Canadian’s turning to Private lenders due to the new Stress Test initiated in 2018. With the stress test, many borrowers no longer qualify with traditional lenders so they have turned to the more flexible Private Lenders.
If you have money that you are looking to invest, becoming a private lender may be the right choice for you! To make the decision on whether to become a private lender, there are a few things you should consider;
Always collect interest!
Whether you are lending to a friend, family, or a stranger; you should not be giving your money away for free. If you had invested your money you’d be earning interest, so if you lend it to someone, you should be doing the same!
You will need legal representation.
The terms of any private mortgage should be drawn up by a lawyer and should outline all the important matters of a mortgage (interest rate, payment due dates, term, penalties, etc.)
You must consider the risks, and your tolerance level for risk!
Not all private mortgage borrowers are riskier, however some certainly are. Since they could not get approval from traditional lenders, it is important to find out why to know if you are comfortable lending.
After considering the above factors, you still are interested in becoming a private lender, your next step would be to call me to discuss the process, and ask any other questions you may have!
Contact me any time to discuss how to become a private lender!