The Truth About Private Mortgage Lending

Private mortgages are a great way to obtain financing when you have been rejected by Conventional and Alternative Lenders. They do not have strict guidelines, and take a more common sense approach to lending.

Private Mortgages, unfortunately, come with higher interest rates and you are responsible for Lender and Broker Fees.  However, the cost can be small compared to the problem that is solved for you by using Private Mortgage Funds.

Key Issues to Consider with Private Mortgage Lending

1. A Private Mortgage Lender will NEVER lend you up to 100% of the Property Value. Forget What your Friends have told you. Private lenders base their decision to fund on the equity in the home and their belief that a Private Mortgage will help you in the short-term. That is why they are able to give financing in cases of bad credit.
2. There are almost always fees involved with Private Mortgage Financing. The lender may charge a fee. Brokers will charge broker fees, since they do not get paid by the lender. These fees will be deducted from the mortgage advance.
3. A property Appraisal will be needed. It is extremely rare that a Private Mortgage will close without an appraisal. Appraisal costs are approximately $300. The borrower is responsible for the payment at the time of the appraisal.
   

Key Issues Explained

• The Equity Spread between what the Private Lenders lend and what the property is valued at, is their security. If you live in a major urban centre such as Toronto or the GTA, you may be able to get up to 95% of your homes value, even with bad credit, if the property is very marketable and certain other conditions are met. However, it is more likely that you will get up to 85%. If your property is outside of these areas, then it is more likely you will get up to 75% of the properties appraised value. So if you’re purchasing a home and need private financing, you will need to have a large down payment, (approximately 20% down payment may be needed). If you are refinancing or doing debt consolidation, you will need to have sufficient equity available.
• You will have extra fees. The lender will charge a fee. The broker does not get paid by the lender, so the broker will also charge a fee. You will have to pay all legal fees to register the mortgage as well. Fees are different for all lenders. Fees start at 1% of the loan amount. Fees charged by the brokerage depend on the complexity and amount of work involved. This is always quoted up front and deducted from the mortgage advance. If you don’t get funded, the broker does not get paid.
• A valid and recent appraisal will be needed. A word of caution. Don’t go running out and order an appraisal because it may not be accepted by the Private Lender. Private Lenders want you to use one of their preferred appraisers. If your appraisal is not from one of them, you will have to pay for another. Instead, have a realtor give a free assessment on the value of your home. Only order an appraisal when you have a lender.

Why a Private Mortgage Might be Right for You

Home n Work Mortgages has access to a large pool of National Private Mortgage Investors registered directly with Home n Work Mortgages. These private mortgages can be arranged for up to 85% of the value of the property with little or no income verification, even with bad credit or recent bankruptcies. In some cases, you may even get up to 95% of the value of the property.

Private Mortgages come with costs, but when used appropriately, can actually save many times the cost in the future. Private Mortgages are intended to be short-term loans used to achieve a specific goal, such as credit repair. By using Private Funds to Consolidate Debt, you will immediately begin to repair your credit and increase cash flow, taking away the stress of financial distress, allowing you to focus on the bigger picture and plan for your future. In one or two years time, you can qualify for institutional financing at much lower rates.

Some situations where a Private Mortgage Lender may be appropriate:

What You need to remember about Private Mortgage Loans:

1. When purchasing, you will need a larger down payment when dealing with private lenders because they lend based on the equity in the property.
2. With refinancing or getting a second mortgage you will have to have enough equity already in the property.
3. The rates for Private Mortgages are higher, but the terms or shorter. Private Mortgages are short-term loans. If you were consolidating debt, when your credit improves enough in a year or two you can move your mortgage back to an institutional lender at much lower rates.
4. An appraisal will need to be done by a lender approved appraiser. Wait for the lender to tell you which appraisers are acceptable.
5. You will have to pay Broker and Lender Fees. These fees will be deducted from the mortgage advance at the time of funding. You will also have to pay all legal fees to register the mortgage. Remember, you need to have enough equity to cover what you need plus your fees.

Unsure What To Do Next?

Discover How We Can Help You Save Time, Money and Hassle getting ALTERNATIVE and PRIVATE MORTGAGES with A Free Consultation.

In your free consultation you will discover…

• How to ensure quick approval for your financing
• How to qualify for easy and comfortable monthly payments
• How to avoid the costly financing pitfalls
• How to get the required financing you need and deserve

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