Private Mortgage Glossary

The total length of time it would take to pay off your mortgage in full, typically 25-30 years for traditional mortgages. Private mortgages usually have shorter amortization periods.

A professional assessment of a property's market value conducted by a licensed appraiser. Critical for determining loan-to-value ratio and maximum loan amount.

Short-term financing used to 'bridge' a gap between immediate funding needs and future financing. Common when buying before selling, or awaiting traditional mortgage approval.

Buy, Renovate, Rent, Refinance. An investment strategy where you purchase a property, improve it, rent it out, then refinance based on the increased value.

Ratio comparing a property's net operating income to its debt obligations. Measures a rental property's ability to cover mortgage payments from rental income alone.

The initial cash payment made when purchasing property. Private mortgages typically require 20-35% down, higher than conventional mortgages.

The difference between your property's market value and the amount owed on mortgages. Available equity can be leveraged for additional financing.

Your plan to repay or refinance the private mortgage. Common strategies include refinancing to traditional mortgage, selling property, or using other funds.

The primary loan secured against a property, holding first priority in case of default. Carries less risk than second mortgages, typically offering better rates.

Percentage of income used for housing costs including mortgage, taxes, heating, and condo fees. Traditional lenders typically require under 32%.

Revolving credit line secured by home equity. Traditional product offering lower rates than private mortgages but requiring strong credit and income verification.

Payment structure where monthly payments cover only interest charges, not principal. Common in short-term private mortgages to maximize cash flow.

Upfront fee charged by private lenders, typically 1-3% of loan amount. Covers underwriting, administration, and legal costs.

Ratio of loan amount to property's appraised value, expressed as percentage. Most private lenders offer up to 75-85% LTV depending on property type and borrower profile.

Date when mortgage term ends and full balance becomes due. Private mortgages typically mature in 6-24 months, requiring refinancing or payoff.

Canada Revenue Agency document summarizing your income tax return. Traditional lenders require 2 years of NOAs for self-employed borrowers.

Fee charged for paying off mortgage before maturity date. Many private mortgages offer no prepayment penalties, providing flexibility.

Individual investor or institutional fund providing mortgages outside traditional banking system. Offers more flexible approval criteria but higher rates.

Additional loan secured against property that already has a first mortgage. Holds second priority position, carries higher risk and rates than first mortgages.

Income earned from operating your own business or working as independent contractor. Requires alternative verification methods for mortgage qualification.

Mortgage application method where borrower declares income without traditional documentation. Requires larger down payment and higher rates to offset risk.

Length of time your mortgage contract and interest rate are in effect. Private mortgage terms typically range from 6-24 months before renewal or payoff required.

Percentage of income used for all debt payments including housing, credit cards, loans, and leases. Traditional lenders typically require under 44%.

Process of assessing loan application risk and determining approval. Private lenders focus more on property value and equity than income verification.