Are Private Mortgages Regulated?

Mortgages can be obtained through banks and mortgage brokers, although the unregulated mortgage market is another option borrowers can look into. If this is the route you’re considering, it is very important to understand all of the details surrounding this option so that you’re fully aware of what this loan entails. 

Private lenders make up the unregulated mortgage market and can be an individual or a company. The reason they are considered unregulated is that there are no stringent regulations governing this market. This is very different from the regulated mortgage market in which the lenders are required to follow strict federal regulations overseeing the industry. There are specific rules that financial institutions must follow and when a lender is not part of the regulated mortgage market, they can provide loans with shorter terms and higher interest rates. 

The reason some borrowers consider pursuing a mortgage in an unregulated market is that they are unable to get an approval form a traditional lender, leaving them no other choice. Mortgage approvals are not always easy to come by as the criteria are becoming stricter and many borrowers have difficulty meeting the demands requested by banks. In order to get a mortgage, they have no other option but to turn to the unregulated market. 

Private lenders fall into the unregulated mortgage market category and have different lending criteria that are more flexible, which is why they can offer those borrowers who were denied from the bank a mortgage. They can work with any candidates they choose and have far more freedom in this regard. This will work in favour of many borrowers who have difficulty getting into the regulated market because recent stress tests and new regulations have made it even more challenging to obtain a mortgage. This is especially true for first-time buyers who often experience difficulty getting approval for a mortgage from a bank. 

The reason behind the strict regulations is to reduce the risk that comes with lending to borrowers who are incapable of repaying their loans. The stress test helps the banks determine whether or not the borrower is capable of repaying their mortgage should their rate increase sometime in the near future. Many Canadians do not pass the test, which has made it very tough for a lot of people to qualify for a home loan. When this happens, borrowers have no choice but to turn to an alternative solution, which is what brings them to the unregulated mortgage market. 

Private lenders offer plenty of benefits, including more flexibility, faster approval, and less stringent lending criteria. If this is something you’re interested in, contact Dhugga Mortgages in Brampton. Whether you want a private mortgage or wish to refinance the one you currently have, their mortgage brokers can help, so give them a call today.

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