Private mortgages are generally interest-only, short-term loans. They are typically 4 mos -3 years in length.

Private lenders can either be individual investors or investor pools that understand that conventional lending guidelines from Banks and Credit Unions are very strict.  They understand that many borrowers are capable of paying more than a traditional lender will allow.

Private lenders are more concerned about the property in general, location, appearance, and overall condition. They prefer that there be more equity in the home usually 20-35% equity.

Why would you use a private mortgage lender?

You would use a private mortgage in the following situations:

You are currently facing foreclosure or bankruptcy
You are self-employed without a 2-year history of business.
You want to purchase or build an unconventional home.
You need your mortgage approval very quickly.
You have a bruised credit history and are being turned down by banks.
You only need a short-term loan.
You have an unconfirmable income that is preventing you from obtaining a traditional mortgage.
You are flipping a home for profit
You need to pay personal income tax arrears
You need to pay off property tax arrears.

Characteristics of a private mortgage:

  • Interest rates 9% -18%
  • Private mortgage rates are the highest when compared to prime lenders and bad credit lenders and should be used as a last resort.
  • Fees are generally 2%-5% of the borrowed mortgage amount and will include lender and brokerage fees.
  • Other fees can include an appraisal, legal fees, and the lender’s legal fees.
  • Terms available for 4mos -3 years
  • 2nd and 3rd mortgages available
  • Typically used as a bandaid solution to a short-term problem.

Private lenders will often specialize or be an expert in specialized categories.

  • Commercial
  • Residential
  • Industrial
  • Construction

Private mortgage lenders want their clients to be able to transfer to a prime lender at the end of their term, or payout the mortgage at the end of the term and refer to this as the exit strategy. They deal in fast and short-term solutions and want to be able to collect their return on investment within the specified time.

The Mainstream Team can help connect you to the right private mortgage lender. With a private lender, the broker’s commission isn’t included in the loan amount, and we will charge you an upfront fee. Despite the charge, it may be worth it to find a lender who can provide you with the lowest mortgage rate for your financial needs.

Contact us today to see if Private Mortgage Lending is right for you!