For the longest time, the majority of people considered private mortgages to be the last resort option, this is no longer the case. Choosing a private mortgage, even if you’re able to get one from an institutional lender, might be the best decision for your future. Private mortgages are for anyone and everyone, especially those who want a personalized experience and easy to understand process.
There are many differences between private lenders and traditional lenders; depending on your situation, one of these differences may be exactly what you need to make the best choice for you. Private lenders are not as strict as banks and large financial institutions because they are often private individuals lending their own money or a small group of investors who make their own restrictions regarding whom to lend money to and more. As private lenders are not obliged to follow the same rules as banks, they are able to make riskier loans and lend to people who can’t qualify for loans with banks under the stricter mortgage regulations.
Some of the advantages of Private Mortgages over bank mortgages are:
Easy to Obtain – When you work with a private money lender, you really only have to provide information that demonstrates that you’ve found a good investment that will pay off. Employment documentation and credit history are not as critical as long as you can prove that you have the financial resources to make the necessary loan payments. Plus, You may receive responses, approval and commitments on the same day.
Flexible Loan Terms – Private mortgage lenders are much more flexible than traditional banks when it comes to loan terms and is able to tailor loans to your specific needs.
Geared Toward Investors – Private money lenders understand that you’re purchasing, refinancing, and/or rehabbing a property based on its after-repair value, not its current value. More often than not, they lend you all of the money you need to achieve your goals with your investment than you would get with a traditional loan.
Get Fund Quickly – The so-called “approval” process is much shorter with private money lenders than it is with banks and mortgage lenders and even some hard money lenders. Given that there is virtually no paperwork to review, private mortgages can be closed quickly. Approval usually takes place within 1 week of application and can be as soon as a couple of days. The processing of the loan and the release of funding takes around 2-3 weeks.
If you’ve landed a deal and have a property under contract, it’s possible to get it funded within days instead of weeks or months.
Open to Challenging Property Types – Private mortgage lenders will often consider properties that many bank lenders would otherwise not finance. These types of properties include:
- Commercial Properties
- Vacant Land
- Rural Properties/Farms
- Construction
- Unconventional properties like churches, gas stations
There are many other reasons someone would choose private mortgage lending over more traditional forms of credit. Maybe you have a poor credit history or no credit history at all. You could also be self-employed or retired. Some people have high-risk properties that can discourage traditional lenders, and others will need a private loan to bridge the gap between what they have and what they need to move into a new home. Or, if you need to take out a second mortgage to pay off bills, a private mortgage may be right for you.
With banks and large financial institutions having more restrictions these days, it can be very difficult for most property owners to secure a mortgage loan; thus, the increasing popularity of borrowing from private mortgage lenders. Although private mortgage lenders charge a higher interest rate than a bank it can’t be denied that borrowing from them is particularly alluring for those with bad credit or don’t have the luxury of time waiting for bank approval. If used correctly, funds from a private mortgage loan can save lives and also save homes in the process. It can buy enough time to allow someone to repair his or her credit score, pay off some debts, or renovate a home so that it can be sold for higher market value and avoid financial ruin.
Whatever your financial situation and as unique as it may be, if you have equity in your property, a private mortgage could be the alternative you have been looking for.
The private mortgages should be only a short term solution, but if it fills the gap and if done right, it could bring long term gains!