How to Use a Private Mortgage
Private money is all about equity lending, an arena where the banks used to be able to compete. Equity lending means that when a client has great credit and pays their bills, but doesn’t not have the traditional income to support the lender’s stiff guidelines, they are able to borrow against the fact that they have good equity built up in their homes.
You also get personalized service. We at the Wilson Team of Mortgage Experts will strive to offer you a choice of private lenders, investors and alternative options. rather than a single option, and we will ensure that they understand your situation and your needs.
Private lenders may also facilitate your move to a bank loan after a year or two, rather than leaving you to fend for yourself. Investors of this type are interested in loaning money and getting quick returns on their investment, so private mortgages are designed to be short term.
Why Go Private?
The world is full of lenders, including big banks, local credit unions, and online lenders. So why not just fill out an application and borrow from one of them?
Understand the Risks
Life is full of surprises, and any loan can go bad. Of course, everybody has good intentions, and these deals often seem like a great idea when they first come to mind. But pause long enough to consider the following issues before you get too deep into something that will be difficult to unwind.
Private Mortgage Agreements
Any loan should be well-documented. A good loan agreement puts everything in writing so that everybody’s expectations are clear and there are fewer possible surprises. After several years, you (or the other person) may forget what you discussed and what you had in mind, but a written document has a much better memory.
Secure the Loan
It’s wise to secure the lender’s interest — even if the lender and borrower are close friends or family members. A secured loan allows the lender to take the property (through foreclosure) and get their money back in a worst-case-scenario.
How to Do a Private Mortgage Correctly
If you’re considering a private mortgage, think like a “traditional” lender (although you can still offer better rates and a more consumer-friendly product). Imagine what could go wrong, and structure the deal so that you are not dependent on good luck, good memories, or good intentions.