Why Private Mortgages Are Skyrocketing?

It was the early 90s, mortgage rates were escalating, a recession was coming and you could eerily feel the change in the housing industry. Since last year the feelings are the same. It’s not a nice feeling.

Another sign that these are tough times is watching private mortgage elevate SoHi from 2021 to 2022. The sword from 13 billion to 22.4 billion $. An increase of over 70%.

What factors have caused this increase?

FEAR – Many Canadians were trying to get in the market with FOMO (fear of missing out).

COVID – Covid had a dramatic affect on the economy. No more government handouts.

MORTGAGE RATES – an increase in mortgage rates was a major factor.

LOCATION – some lenders were refusing to loan on remote and rural properties.

TIGHTER MARKET CONDITION – the government has imposed stricter mortgage guidelines. 

The term of the mortgage should be short. If these issues cannot be solved in a year, then maybe a high-priced private mortgage is not for you. In some cases, two years can be considered.

If considering a private mortgage, you should be asking very blunt questions to determine if financial relief can be achieved in a year. The client bears some responsibility as well to not only be honest to themselves, but also to be frank and straightforward to the brokers questions. Only this kind of thought process will help you reach the best conclusion to your end goals.

Can private mortgages be good?

Yes, but it must be specific in terms of purpose with a belief it is only a temporary mortgage. Private mortgages have very high rates with added high fees as well. The majority of these loans are interest only payments so the principle does not decrease.

How to think if considering a private mortgage

Do you have an exit plan? If a private mortgage is a loan of last resort, how will I get out of it? Questions to ask:

Will my credit score increase?

Will my health be better?

Will my employment situation get better to pay out the private mortgage?

Am I expecting a windfall of cash to improve my current financial situation?

Will my self-employment income increase enough to support a more standard mortgage?