What is a private mortgage?
Private mortgages are real estate loans that use the property as collateral. It does consider the borrower’s credit and income but it is not the main focus.
A private mortgage is funded by a private investor, or a Mortgage Investment Corporation. Syndicates also provide private mortgages. A Private mortgages is more flexible then institutional financing.
A private mortgage isn’t for everyone, but it has a role and purpose in certain situations. Credit can be good or bad, and a private mortgage is a good alternative if cannot be approved institutionally.
Short term private mortgages is the norm. It is usually provided for a 1 to 2 year term only. It is often based on interest only payments and while some may see this as a deterrence, it is actually a benefit. Monthly payments are lower, and the borrower can re qualify mainstream once the impediment is gone.
Terms can be closed or open with or without interest penalties for early termination. This is important if you will be in a situation to refinance your mortgage with a mainstream lender before the term is up. Choosing the right term is important if you are planning to transfer to an institutional mortgage before maturity.
What are the reasons you might consider private mortgage financing?
- Self employed and cannot prove your income
- Are buying a specific type of property the bank will not finance
- Have little documentation to provide
- Location of the property is outside of bank’s lending area
- You have quick closing to meet and you cannot extend your closing date.
- Private financing can fund deals faster.
- Any other situation that bank financing A or B is not possible.
Pricing and Rates
- Pricing start at 2% higher than average 5 year posted rates
Rate range is 5.75% to 9% interest only
- 2nd private mortgages can range between 6.99% to 15%
- Lender fees and broker fees apply. If you contact us we wll provide you with more accurate figures.
A private mortgage is usually arranged to 75% LTV. However, higher lending values is available but pricing is more aggressive. In major city centers it is possible even to get as high as 85% with special mortgage products.