What is a Private mortgage?

Do you want to buy a home however your credit score is not enough to get a traditional mortgage? A private mortgage loan is just right for you. A private loan is a loan that is financed through private lenders who specialized in mortgage loans, can also be a family member or a friend, or an individual investor or group of investors who put their funds together to do multiple deals at once. They can be great alternatives for individuals having difficulty in getting a loan using conventional or traditional lenders. Private mortgage lending in Canada and private lenders in Toronto accepts loan applications even you have a poor credit rating. However, having a low credit score means having higher interest rates.

Differences between traditional and private mortgage

Traditional and private mortgage has four differences:

Amortization: The terms of a private mortgage usually within a short term loan which range from one to three years, but some private lenders who can offer long-term loan solutions up to 30-years.

Payments: With a traditional mortgage your payments go towards your principal and your interest. While a private loan, payments go towards only your interest, while your principle remains the same.

Fees: Aside from your monthly interest payments, you may need to pay your mortgage broker a commission. However, there are some private mortgage lenders that do not include the payment for your mortgage broker. Always check on your contract agreement.

Interest Rate: Because most private mortgage borrowers have a poor credit rating or low credit score, Private mortgage interest rates can range between 10-18%, this is significantly higher than traditional lenders. And intended for individuals that are high-risk for lenders, and therefore, have to pay a premium to have access to the loans.

EASY TO QUALIFY

Borrowers who are not able to secure a loan from a traditional lender such as a bank, can qualify for a private mortgage loan. Banks require lots of documentation of the borrower’s finances and determine their eligibility on specific criteria, whereby if you do not meet those criteria, you are deemed “unreliable,” even if you are able to repay the loan. Bank or traditional mortgage lend money who has a steady financial income.  Having a minimum of two years with in the same financial source is required. if you happen

HOW TO STRUCTURE YOUR PRIVATE MORTGAGE

All loan that you get should be well documented. Documentation protects you and the lender. The things that should be included clearly stated are:

– Monthly payment dues(First of the month, quarterly).

– How and where your mortgage payments will be made.

– Do you have an option for prepay or balloon payment, or will they be penalized?

– Is your loan secured with/without collateral?

– Is there a penalty for missed payments?

A private mortgage should be a last resort solution for those who do not qualify for prime or conventional credit lending. If you need the cash quickly and are comfortable with interest-only payments, a private mortgage can be a great option.

If you are in the market for a new home, contact private mortgages Canada  Whether you are looking for a private or traditional loan, we can assist you navigate the process and ensure you are getting the best rates and terms.

1 comment

  1. Why Private Mortgage Considered as an unregulated Mortgage? | Private Mortgages Canada

    […] Private lenders may fall under the unregulated mortgage market category because they may have different lending criteria and this is the reason why they can offer those borrowers who have denied the bank mortgage. they can work with any loan applications and they may have more freedom in this regard. This may work in favor of many borrowers who have difficulty getting into the regulated market because recent stress tests and new rules and regulations have made it even more challenging to obtain a mortgage. This is true for first-time buyers who often experience difficulty getting approval for a mortgage from a bank this is the main reason why Canadian may look for a private lending agency in Canada or a private mortgage in Canada. […]

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