Why Choose a Private Mortgage Lender Over a Bank?
When a person is ready to take out a mortgage and own a home, their first inclination is usually to run to their bank to see what they qualify for.
What most people don’t realize is that there are many different lenders out there beyond big banks and financial institutions.
Purchasing a home is a huge financial decision and one that you don’t want to make quickly. Because there are so many options to choose from, it’s best that you understand your choices when it comes to signing up for a mortgage.
Private lenders are available to fulfill mortgage-related needs and can compete with a bank’s interest rates.
So if a private lender can provide you with a mortgage just like a bank can, what’s the difference? Why choose one over the other?
Private lenders and bank lenders operate differently, with the main difference being exactly what they can do for customers.
Keep reading to find out how private lenders compare to bank lenders (and why you should consider a boutique lender for your mortgage needs):
What is a Bank Lender?
A bank lender is a financial institution that takes funds from depositors, pays them a low interest rate (or not at all) and then lends the money to a borrower.
When they make these funds available to a borrower, it is expected that these funds will be repaid along with the payment of any interest.
Bank lenders will borrow out the funds at a slightly higher interest rate than what they pay in order to make a profit.
Banks have notoriously low interest rates but their methods of approval are strict, making it difficult for those with less-than-perfect credit to secure a mortgage.
What is a Private Lender?
A private lender, on the other hand, is typically funded by investors, banks, or both.
Interest rates on private loans tend to be higher than those from a bank but private lenders are more likely to loan out money to those who may otherwise not be approved due to income or credit issues.
They can also be more flexible during the approval process, looking beyond just your credit score.
Banks and Private Lenders: A Comparison
Banks can be harder to deal with than private lenders, mostly because they have to abide by provincial and federal regulations.
Although private lenders are still subject to laws, they are less regulated and have more flexibility when it comes to the loans they make and the customers they serve.
Overall, it is easier to get approved by a private lender than a bank lender – private lenders can customize each loan to accommodate a customer’s credit scores and debt income levels.
Bank lenders do not have the liberty to customize loans since their approvals are computer-based and determined by strict calculations.
They also look at easily traceable and documented income sources and financial histories, which can make it challenging for self-employed individuals to borrow money.
Private lenders tend to be more creative in finding documented income and have the leeway to work with customers to investigate explanations for background flaws.
The Benefits of Using a Boutique Lender
Boutique lenders are a smaller type of private lender that provides specialized services and custom solutions and can provide the same mortgage lending services as a traditional bank.
Because smaller lenders are less well-known, as compared to big banks, they value their reputation and the support they can provide to their clients. Boutique lenders will strive to promote a personalized level of service.
Here are some other benefits of using a boutique lender for your mortgage needs:
They Can Offer Better Rates
Borrowers are not limited to obtaining mortgages from their bank and have an opportunity to shop around for the best rates.
Boutique lenders offer low rates but also understand that interest isn’t everything.
They will help you calculate fees and features when it comes to comparing home loans in order to make a clear comparison.
They Have Lower Fees
Boutique lenders don’t want your money – they want your business.
In order to draw customers in and provide them with a valuable experience, boutique lenders tend to offer lower fees.
They Have Flexible Lending Standards
Boutique lenders aren’t required to tighten their standards in the same way that banks are. This gives them more flexibility to accommodate customers despite their past credit situations.
Boutique lenders can look at the big picture and get to know a customer’s situation personally. Using this information, they can better craft a mortgage that suits their situation and needs.
Boutique lenders are more often able to get their clients approved when banks cannot.
They can take the details of your unique case into consideration instead of relying solely on numbers.
Why You Should Choose a Private Mortgage Lender Over a Bank
Everyone’s financial situation is different which is why it’s important to explore all of your options.
The main benefit of working with a private lender is that they don’t look at your credit score alone. They take all factors into consideration when determining your eligibility for a mortgage.
For this reason, their services are more personalized as opposed to a bank that can only process your application based on numbers.
Plus, because private lenders are in direct competition with banks, they are more focused on providing you with a valuable and positive customer experience.
This is especially true of boutique lenders, who cater to a smaller demographic and can personalize the process of getting you a mortgage.
Caplink is a boutique lender that is dedicated to working with you to find mortgage financing. We can accommodate most financing issues including bad credit, second mortgages, foreclosures and more!
We understand that many of our clients face difficult times but we strive to discretely help you rectify your problems to allow you to move forward in a positive way.
If you’re ready to explore your mortgage options, please get in touch with us today!