Sometimes a traditional mortgage with a bank or monoline lender is not a good fit for our clients. That is why we can arrange private mortgages as well. Private mortgage companies have a higher risk tolerance for borrowers that fall within that same category – higher risk. Private Mortgages have a bad reputation but they are not all bad. Here are several situations that a private mortgage is beneficial:
· Poor credit
Private lenders are usually a lot more flexible than traditional ones. It could give the opportunity to utilize the equity in your home to pay off your debts and get your credit back on track.
· Self-employed
Private lenders can be a great option for those who have commissioned income, work seasonally or are self-employed. Entrepreneurs who make money but have trouble getting a traditional mortgage as they may not declare all of their income personally or to the government.
· Bridge financing
If you’re buying a new home before selling your old one, or if you need money for a short period of time to cover you while you’re waiting for a future lump sum payout, a bridge loan might be the right choice.
· Debt consolidation
Some traditional lenders get nervous when they see that you’re trying to pay off existing debt, especially if you have poor repayment history. But the reason for those late or missed payments may be completely resolved by consolidating all the debt into one lower monthly payment. Private lenders are more flexible in their guidelines and usually happy to help when they can see that effort is being made to resolve the issues.
· Second mortgages
A second mortgage can be a great tool for consolidating debt, funding home renovations, providing working capital, or a bridge loan. A major advantage of a second mortgage would be to avoid large breakage penalties on your first mortgage, or for those with a low-rate first mortgage but who wouldn’t qualify for such a low rate with a new first mortgage today.
A private mortgage is usually a short term strategy. They are usually for 1 or 2 year terms but can be longer or shorter depending on the borrower’s needs and the lender. Whether it be 6 months, 1 year, 2 years or even longer, we always have an exit strategy in place. Private mortgages are a means to an end. A way to get you to where you need to be to qualify for a traditional mortgage or just get you into the housing market when you or your property could not qualify for that traditional mortgage.