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Understanding Private Mortgages
When qualifying is a problem!
If you don’t qualify for the mortgage products offered in traditional banks and prime lending institutions, there are always options for you to consider before you throw in the towel. Perhaps you have a few credit issues or you just need advice on the best approach to take. Failing to qualify for a mortgage at your bank doesn’t in any way make you a bad person. You’re actually a smart home buyer if you take time to shop for the right product that best suits your situation. Perhaps a private mortgage lender solution could be the best alternative for you.
What is a private mortgage?
Private mortgage products are offered by non-traditional financial institutions or sometimes individuals who are willing to give out money to those who have gathered adequate equity in their property. It is usually a short-term form of financing. Private mortgages can work as second mortgages if you already have another mortgage or as a first mortgage if you don’t own another home.
When Should You Get A Private Mortgage?
Private mortgages are ideal in certain scenarios such as:
- If you need to purchase property that is unique or outside the lending criteria given by traditional banks
- When purchasing a property that requires extensive repairs and need money to finance the renovation process
- A lack a source of income due to sudden job loss or other reasons
- You have low credit score and want to improve it by paying off various debts
- Your debt consolidation options but have been turned down by traditional banks
- If you have suffered a divorce, illness or any other situation in your life that has affected your ability to earn money and clear debt
- You require access your equity from your property when facing a foreclosure
- Your property taxes are in arrears
- You are self-employed with little or no fixed income
- If you don’t want to finance your first bank mortgage since the penalties are extremely high
- You are a foreign investor and banks generally don’t want to offer you financing
- Looking for short term financing that is open without any penalties
Private Mortgage Lender Rates and Requirements
Private mortgages allow you to make interest only payments. This is particularly why they are an ideal form of financing for anyone with temporary cashflow issues as well as investors. However, expect to also pay higher interest rates than what is offered in prime banks. The rate you pay will depend on your unique situations such as your credit score, whether it’s a first or third mortgage among other factors. If your first mortgage is in good standing, you are likely to get a better rate.
Private mortgages come with special requirements which vary from lender to lender. Work with a mortgage broker who will help you find the right product to suit your needs. Remember that private mortgages are simply a “stepping stone” which gives you adequate time to address your current financial challenges.