Popularization of Private Mortgages
Private mortgages became more popularized in 2021 when the housing market was hot. Canadian home buyers didn’t consider the fact that the prices they qualified for were far less than the bid they were putting on homes. Most of the bids were unconditional so the buyer had to figure out how to get the money they needed in order to close the deal.
This forced many Canadians into private mortgages because they could get approved. Buyers were pressured to get loans that were considered more risky in order to solidify a home, which was out of their budget. Now with interest rates growing, this has made payments unaffordable because ultimately, they couldn’t afford the home or had very little wiggle room.
Private mortgages aren’t necessarily a bad thing as it’s up to every Canadian to decide if they can afford the money they’re being lent. In a situation like what we’ve seen over the past few years, these loans can have an adverse effect. However, when used responsibly when there’s no other option, it can put people into homes they otherwise couldn’t get a loan for.