A private mortgage is an alternative source of financing given to a borrower by a private lender, and is usually sought after when a traditional bank or lending institution will not approve a borrower for a mortgage or a home refinance loan. They are usually short-term interest-only loans ranging from 6 months to 3 years. Our experienced mortgage agents specialize in finding the best private lender who will offer you the right option for your needs and specific financial situation.
Private lenders understand that the guidelines used by the banks and other traditional lending institutions are too stringent, and that in many cases banks turn away borrowers who are perfectly capable of paying back their mortgages. Unlike banks, private lenders place a larger focus on the value and over condition of the property, instead of simply looking at the borrower’s credit and income.
A borrower will often try getting a mortgage or refinance their property by making contact with their bank first. These days this is a hard feat to accomplish. If their banks turn them away due to bad credit, high debt that may be in arrears, low income, or other issues, then they would contact a mortgage broker and try to get approved at an alternative lender, also known as a B lender, through the services of a professional mortgage broker.
A lender would charge higher rates than a traditional institutional lender, but the fixed rates will still be lower than in a mortgage from the private sector. Examples of B lenders include trust companies and certain credit unions. If the borrower has a severe problem with their credit and is declined by a B lender, they would then turn to one of many private mortgage lenders that are accessible through your mortgage agent and broker for a short term private mortgage.
A 1 year term is most common when it comes to a private mortgage. If this is a problem for you and a shorter or longer term might be a better choice, those types of private mortgages are available through certain mortgage lenders who lend using their own private funds. Terms start from 6 months for a private home loan and can be as long as 3 years for a private first mortgage, second, or third mortgage depending on the lender.
A private mortgage is an ideal short term solution for someone who almost qualifies at a B lender but might need some time to either build up their credit, save up a larger down payment, or grow their income and net worth. In this case, private is the way to go.
Unlike traditional lending institutions, private mortgage lenders lend primarily based on the value of the property, the equity remaining in the real estate, and they even take into consideration the city where the property is located in.
