Private Mortgages Explained: Help Clients Avoid Overpaying on Private Loans

Welcome to the Close More Deals podcast. I'm your host, Scott Dillingham. Today, I'm gonna be talking to you about private lending. Now most people know what private lending is, however, there are a lot of sharks out there, and I'm gonna show you guys ways on how to maximize this for your clients based on due diligence on the back end, and as well as some creative ways that we've used private lending to

help a client get approved for their loans. So with private lending, what I

have found is a lot of people, and listen,

this is everybody in the world,

including maybe even you, and if it's you, not trying to offend you,

but it's true. People are lazy, Not everybody, right, but over time, right, you look at civilization, back in the day, everything was done by hand, right? Empires were built by hand. Everybody's working, everybody's moving.

Now with technology and AI and all these other things, like, we we don't do nearly the same as what we used to, and we love TV, entertainment, cell phones, scrolling on social media. You know

what I mean? So my point is is we're kinda lazy. Like, really, if we think

about it. Or or or maybe the better term is we enjoy leisure time too much. So anyways, I wanna paint that picture because what happens is brokers are the same way. So the goal is to get the client approved for the mortgage. So quite often, whenever we hear of a client needing a private lender, brokers generally will go, and this is not all brokers, but they generally will go with the path of least resistance, and they'll just call up the lender that they know will get the job done.

That is sort of what we are trained for is is to optimize and find the best lender for the client. Now the thing is, is they're placing getting the approval as the number one criteria, which is super super important, but matched up to that should be rate and term, and that's how we do it. So it's drastically different. We see it all the time where clients are coming to us with approvals on a first mortgage from anywhere from nine to 12%, which is like the average in the private lending market. So I'm not saying like that's crazy, but, like, we're we're getting loans done at 5.99 and, like like, low fees, like so what I'm trying to say here is there's lenders that have better pricing that are out there, and a lot of brokers are lazy, so they're not looking for that.

They're just going to that one, oh, you need a private lender? Okay. Here you go. And, it helps your client, but it also doesn't help your client because if they're paying too much into the deal, it can really

hinder their equity position, which might also reduce their ability to sell in the future. Right? Like, maybe

this is a temporary home for them just to get something now, and it happens all the time. I'll give you some examples, like I said, in a second, but where this is just something temporary,

they just wanted to get into the market, but if the terms are too high and then you

go to sell, right, and there's no equity because they were in an interest only mortgage or the payments were too high that they couldn't pay anything down, Do you know what I mean? It puts you in a spot, it actually hinders you as a realtor, it hinders your ability to sell and to help

your clients the very best. And even if

it doesn't result in a better sale, imagine being the realtor that, hey, you know what, the average interest rate in Canada for private lending is nine to 12 and I got you six by making a recommendation to you, you know what I mean? That's fantastic. Now again, I'm recording this early February twenty twenty six, rates change all the time, but this is a program that's been out for at least a year at this rate. So it is for an Ontario and an Alberta based lender. There's probably other lenders that are even cheaper, you know, in different niche markets.

I'm not sure, do try to match up with lenders that have a wide area of coverage because we we lend all over the place, but the point is, is we will continue to shop around, so if there's a file in a new location, we will always check and see what we can find, but the point here is to get your client the best deal. Now here's some cases that we've done. So a lot of people think, oh, I have bad credit, I need a private lender. That's one way, but that might not be to the client's best interest. We declined a client the other day, she had a large down payment, she wanted to buy her own home because she's getting into

a fight with her family and she lives with them

and wants to move out and we told her no because she doesn't have the money to pay it, do you know what I mean? Like, so we do look at those things and I realize from the realtor standpoint, you might say, oh, well, sucks, know, I could have got a sale, you know, but this client's realtor was a 100% on board. They're like, I agree, we don't wanna set a client up for failure, I don't want that on my name, right? So that is one way that we we do it, but another way is, like, say a client is moving from one province to another province, and they haven't lined up their job yet, but we know based on their previous job, a ballpark of the income that they can get once they secure a job, we will then give them a private loan up to what those amounts should be. There's different tools that you can check for the average income, like Glassdoor, even some AI tools, you can have them research and say, hey, what's, you know, the income in this area?

And it will research and pull in sources for you. So you can kind of see, so we set clients up that way safely, right? We don't just let them buy whatever they want, we like say, okay, well, is what, you know, let's say a nurse, right? Maybe a nurse in Alberta makes more than a nurse in Saskatchewan, just making this up, right? So let's say they're moving to Saskatchewan, we're going to find out what nurses make there, and that income is what we'll use on the application, and we'll find out their max approval, and then we'll get them the private loan.

Now the private loan is only temporary until they do get employment, and then we're going to switch to a regular lender. So that has been a fantastic one. Bridge loans has been another one, so say a client is selling their home and they wanna buy another home, they have a lot of equity in the home, but the market's a little slower, so they haven't sold it yet, we'll do a blanket loan or a bridge loan with a private lender, it covers both properties they can buy, and then it gives them that window to sell, and once they sell and pay off that private loan, we'll then replace that with a regular traditional lender, because the banks are not gonna do stuff like this and sometimes the client, because what a bank could do, the bank could refinance the existing home and then give them the loan on the new home, but what if they don't qualify for both homes, right? Like what if their max budget only supports one home? That's where we like to use private lending, do you know what I mean?

So we try to use it in those creative scenarios, maybe an investor's trying to renovate a property that needs a lot of work, We'll tap into this as opposed to, oh, you know, you're losing your house, let's get this set up and which sometimes that is a viable option, right? Like if someone's been laid off and they're reapplying for a job, that can help too. Just there's all these different scenarios, but my point of all of this, and what I want you guys to know is that we do always look at the exit, and we do always look at who can give your client the best rate. So by working with us, details in the show notes, book a

call, by working with us, we're not gonna set your client up for failure. Do you

know what I mean? So it's gonna keep you having a good name with your customer, and we're gonna do everything we can to obviously get it approved and just make it work and save them the most money at the same time. So we we we make you look like an hero in this case. Right? It's not these ridiculous interest rates that we hear from brokers all the time or brokers charging these crazy fees because they know a private loan is the only option for the client, so they're just ridiculous in pricing.

We don't do that either. I mean, our max that we charge is 2%, depending on the loan size will go down as low as one on a private loan. That's what we do. I'm putting it out there, right, just so you know. The lenders have their own fee, sometimes they pay us, sometimes they don't.

If they pay us, you know, we reduce our fee or it's not even there, right, because we're getting it from the lender. So we yeah. It's there's all these different options, but that's kinda where we are. Wanted to shed this share this with you. I hope it was valuable, and if you liked it, please share it with a friend.

Look forward to seeing you next week. Take care.