When a mortgage with a traditional lender or an alternative lender is just not the right fit, you may consider a private mortgage. To begin, here are some details on private mortgages.
Most mortgages require evidence that you can repay them. To prove this, lenders are interested in your income and credit score. If your income, credit score and debt to income ratio are favourable then you should be approved for a mortgage with a traditional lender.
However, the approval process with traditional lenders can be time-consuming. Even those with favourable finances can find the process takes a few days. The timelines usually entails the lenders review, documents review, an appraisal and so on.
Private mortgages are based more on the collateral, and the lenders are less focused on a your current finances.
Private mortgages are typically offered for shorter term such as one or two years. There are also open options available. The shorter terms can assist in providing more opportunities to reevaluate your financial situation. With future reviews, we can see if there is an opportunity to move you to a more favourable lending solution. That solutions being one with a potentially lower interest-rate. With an open mortgage, you can pay it off at anytime without a penalty.
Also, as private mortgages typically come with higher interest-rates it is best to not carry the debt for a long period of time.
Even with a higher interest-rate private mortgages still do have their benefits, here are a few of these benefits:
A private mortgage makes sense as a mortgage for the short term. For example, for those flipping properties or who need to pay some debt or borrow money in a timely manner.
Reasons behind getting a private mortgage certainly change from person to person.
The downside of a private mortgage typically is the cost associated with setting up and carrying the mortgage. Private mortgage lenders typically have fees. Also, an appraisal is usually needed as well as a lawyer.