What is a Private Mortgage or Private Lending?
A private mortgage or private lending is offered by investors or MIC (Mortgage Investment Company) in a first, second or third position. This type of mortgage is typically on a one-year term, and no longer than two years. Private mortgages or lending can cover more than one property concurrently.
Why a Private Mortgage is right for you!
Today many homeowners and buyers fail to qualify for a traditional mortgage. With the new stress test that has been introduced and with borrowers having to find a different type of lending solution, private mortgages are the best lending alternative for you. Most people are scared to get a private mortgage because of the high interest rates and the extensive renewal process. However there are several positive factors for private lending.
- Homebuyers can accept a private mortgage in order to purchase their dream home rather than living on rent.
- Can pay off credit card or CRA debt.
- Consolidate several types of debt and make it one monthly payment plan and build your credit.
- Be able to purchase a new home while you are still having to successfully sell your existing property.
- Borrowers can qualify for a short term construction loans for flipping properties.
- You may only need a private mortgage for a short time, a few months or less, with a good exit plan.
If you are thinking about getting a private mortgage, it is important to understand that you might be able to invest faster than waiting for a traditional loan.
The Total Cost of a Private Mortgage
If you are in a situation where private lending is the last solution, you should understand that you do not want to stay with your lender for a long term. These types of mortgages have different types of lending fees, interest rates, administrative fees, renewal costs and much more. There is no real number or example that tells you exactly how much private mortgage will cost you. It varies depending on your financial situation and your exit plan.
The interest rate for most private mortgages are compounded monthly compared to other financial institutions that compound semi-annually.
- Private First Mortgages starts around 7%.
- Private Second Mortgages starts at 9.99%.
Both mortgages depends on your financial situation that will determine your interest rate. This does not include lending fees, brokerage fees, renewal cost, etc.
Finding the Right Private Mortgage Lender
If your bank or primary financial institution refuses to qualify you for a mortgage, you can work with reputable and trusted mortgage brokerage.
These financial institution have access to various different types of lenders rather than depending on one bank or trust company. There are several advantages with working with a professional brokerage:
- Brokerages have worked with different lenders through a long period of time, which means that they have created a good relationship with them.
When you apply through brokerages the process to get an approval is much quicker, especially since they know their lenders requirements well in advance.
Though this alternative is more expensive, it is a short term plan for a long time solution.
A good broker can be a good financial advisor for you and can you to build your credit and future investment portfolio.
- Most private mortgages requires a home appraisal which adds a cost of roughly less than $500, however those lenders use their own appraisal companies. There are some lenders in the market who will accept certain reputable appraisal companies in case the appraisal is less than six months.
Within the market today there are several investors and flippers who use and trust in private lending. With a short term payment plan, they are able to buy and sell quickly within a short period of time. If this is what you are looking at doing, give us a call today and let us help you to invest in your dream property and guide you find the most suitable private mortgage that fits your needs!