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It feels like only millionaires can buy real estate now, doesn’t it? We don’t blame you for feeling alienated and left behind, especially if you live in Vancouver or Toronto, Canada’s current real-estate hot spots. It’s also very tough to get a mortgage these days, and many people are realizing that they just can’t qualify for bank loans.

Urban dwellers know that real-estate prices are sky high, with even dinky studio condo prices reaching into the mid-$200,000 range.

It turns out there’s another option for people who can’t/don’t want to go to banks or trust companies for their mortgage loan: the “shadow market.” It sounds sinister, even illegal, but rest assured it’s not, and it’s been in existence since people started buying and selling real estate.

Basically, using the “shadow market” is using a private lender. Often just your average Canadian, these lenders lend to get a higher rate of return. Most of the prospective lenders mortgage their own homes, and they do so at a three-to-four per cent interest rate. Then they turn around, take that money and lend it to other people (in this example, you) for 9-to-10 per cent — and presto, money!

Before you start thinking “Why aren’t I doing that?!,” recognize there are downsides to being a lender. If there’s a downturn in the market, you could lose your entire loan. Banks have many loans to offset the cost, but you’d just be one person. You could potentially lose everything, and then some.

As for using a lender yourself, proceed with caution. While they may offer you a lower interest rate, the inherent risk of losing it all is unavoidable. This is probably why around 99 per cent of Canadians go through a bank or trust company for their mortgage.

Maybe we should all just live in shacks out in the woods. Sounds so much easier (and cheaper). Watch the video above for more information on the “shadow market.”