What is a Private Mortgage Loan?
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 institutions will not approve a borrower for a mortgage or a home refinancing loan. They are usually short-term loans ranging from six months to three years. As an experienced mortgage broker, I 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 strict, and that in many cases, banks turn away borrowers who are perfectly capable of paying their mortgages. Unlike banks, private lenders place a larger focus on the property’s value and state, instead of simply looking at the borrower’s credit and income.
A borrower will often try getting a mortgage or refinancing their property by contacting their bank first. Nowadays, this is a hard feat to accomplish. If your bank turns you away due to bad credit, high debt that may be in arrears or low income, I can seek out an alternative lender, also known as a B-lender, through our private lending services and platforms.
A B-lender would charge higher rates than a traditional institutional lender, but the fixed rates will still be lower than for 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 will then turn to one of many private mortgage lenders that are accessible on our platform.
A one-year term is most common when it comes to a private mortgage. If this is a problem for you and a shorter term might be a better choice, those terms range from six months for a private home loan to three years for a private first, second or third mortgage, depending on the lender.
A private mortgage is an ideal short-term solution for someone who almost qualifies with a B lender but might need some time to either build up their credit, save up for 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 property’s value, the real estate’s remaining equity, and they even take into consideration the property’s location.