A bank decline usually names the reason. Credit, and income that is hard to document, are the two that show up most. The property can be the third. A B lender takes some of those files. The rate is higher than a bank rate, and there is often a lender fee. A private lender is a further step. The term is often short, and the fees are a real part of what you pay. The Port Moody page is the city page. Read the B lender page, the private lending page, and the debt page before you treat either product as a normal bank mortgage.
The order matters. A private mortgage is not the first call when a bank has not even seen the file. Send the bank the documents. If the bank says no, keep the decline. That letter tells the next lender what failed. Skipping the bank and going straight to a private lender can cost you a fee you did not need to pay.
What a B lender is for
A B lender is for a file a bank will not take, where the income or the credit is off the bank's page but the borrower can still carry a higher payment. The higher payment is the point to test. Run it on the mortgage calculator at the rate you were actually offered. A payment that only works at a bank rate you were denied is not a payment you have.
B lender terms are often one to three years, not five. The idea is that the credit or the income is repaired and you move to a bank later. If nothing about the file will change in those years, you are planning to renew at a high rate again. Say that out loud before you remove subjects on a Port Moody purchase.
What a private lender is for
A private lender is usually a person or a small fund, not a bank. They lend on the property and on a clear way out. The way out is a sale, a refinance to a bank, or another lender. If you do not have one, the private loan is the debt you are stuck with when the term ends. Private terms are often a year. The fee can be taken from the advance, which means you receive less than the amount on the paperwork.
Do not use a private loan to win a bidding war if you cannot describe the exit in one sentence. "I will figure it out" is not an exit. A firm sale of another property, a bonus that is already in a contract, or a bank file that only needs one more year of returns can be an exit. A hope that prices rise is not.
The papers to send
Bring the bank's decline if you have it. Bring the Port Moody contract if this is a purchase, with the subject date visible. Bring income documents even if the bank ignored them. A private lender may still want to see that some income exists. Bring the current mortgage statement if you already own. Bring a list of every other debt. A private lender who discovers a second mortgage at the notary will stop.
The decline, or a note that you have not applied at a bank yet.
The contract and the subject-removal date.
Income documents and a list of debts.
The exit: sale, later bank mortgage, or another lender, with the date you expect it.
Any other charge already on the title.
If this is your first purchase, the first-home page is still worth reading, but a private first mortgage is a different product from a bank first mortgage. The down payment a private lender wants is often larger. Ask before you write an offer that your savings cannot support.
Fees and the notary
Ask for every fee in writing: lender fee, broker fee, and legal fee. On a bank file the lender pays the broker. On a private file you may pay a fee as well. Those dollars come off the money you thought you were borrowing. The notary has to be someone who will close a private mortgage on your date. Not every notary will. Ask before the subject date.
Chad Watts is a mortgage broker with TMG The Mortgage Group. One application goes to more than 50 lenders, which includes the bank path and the other paths. You should know which path you are on. His BCFSA licence number is 142612. Send the decline and the contract through the contact page or the application. The about page and the questions page are the background.
Write the exit before you write the offer
Put the exit on paper in three lines. What pays this loan off. When that happens. What it costs if you are late. If you cannot fill those lines, you are not ready for a private mortgage on a Port Moody purchase. A B lender file needs the same note, with a longer window. "Move to a bank in two years" only works if you can say what will be different: the returns will show two years, the collections will be gone, or the other property will be sold.
Price the payment at the real rate and add the fee as if you had borrowed it too, because often the fee is deducted from the advance and you still owe it. Then ask whether you can carry that payment if the exit slips by six months. Private terms do not always renew. Some lenders want their money on the day the term ends. A plan that needs a renewal you have not been promised is not a plan.
Keep the subject date realistic. A private file can be faster than a bank file, and it can also stall on the lawyer or on title. Do not remove subjects the day after you call. Give the lender and the notary enough time to read the title and the contract.
Questions on a Port Moody private or B file
Should I hide the bank decline?
No. The next lender will order credit and will see the recent inquiry. The decline tells them what to solve. Hiding it wastes the few days you have before subject removal.
Can I pay the private loan off early?
Sometimes, and sometimes the contract has a penalty for that. Read that clause. An exit that requires you to break the private loan in six months is useless if the penalty eats the reason you broke it.
Is a B lender the same as a private lender?
No. A B lender is a licensed lender with a program for files outside bank rules. A private lender is a further step, usually shorter, and usually more expensive. Use the bank, then the B lender, then the private lender. Do not reverse that order without a reason.
Who pays the fees?
Ask for the list before you sign. On a private file, assume you are paying a lender fee until the paper says you are not. On a bank file, the lender pays the broker fee.
