If you’re considering applying for a loan through a private lender to finance the purchase of real estate, it is important to understand the various types of mortgages available and how they differ (understanding the different lending criteria can also help avoid surprises too). From renovation mortgages to commercial mortgages, bridge financing and blanket mortgages, there are many different options that can fit your needs depending on what you are looking for. In this article we will explore the differences between these various loans so that you can evaluate your options.
A construction or renovation loan is a type of mortgage used to finance a real estate project in three or four draws (access to funds from parts of the loan). This type of loan can also be used to cover upgrades or improvement projects that need to be completed on a home before it is sold.
A commercial mortgage is used to finance the purchase of an office building, multi-unit apartment building, mixed use building, warehouse, retail store, or other types of commercial real estate. This type of loan is typically more difficult to qualify for than a residential mortgage through traditional lenders, as it’s considered higher risk.
Bridge financing is a short-term loan used to purchase a property before obtaining permanent financing such as a conventional mortgage. Common examples are when the borrower needs to use his or her current home’s equity for a down payment on a new home, or if a new home borrower started a new job and doesn’t qualify for a traditional mortgage for a short period, or persons needing to pay off a large debt quickly.
A blanket mortgage is used to purchase multiple residential or commercial properties with a single loan. This type of financing is typically used by investors who are looking to purchase several real estate investments at once, with more flexibility in terms of repayment than traditional mortgages.
Second mortgages allow access to additional cash when you need it most. With no early payout penalties on second mortgages in most provinces, these loans can help with all sorts of expenses that come along: life events, debt consolidation or tuition payments.
Private mortgage loans can be ideal for individuals in need of an interest-only loan. These are just a few of the different types of mortgages available for real estate purchases. The right loan for you will depend on your individual situation, so it’s important to consult a broker before making a decision. With the right mortgage, you can make your real estate dreams come true!