September 22, 2022

Understanding Private Mortgages

professional looking mortgage broker in a suit, with a document on a wood desk

Buying a property isn’t like any other purchase you’re likely to make. It’s anything but e-commerce, offering consumers incentives like free refunds and major discounts. Big-ticket items of this nature have complicated pay structures.

Typically, homeowners apply for a bank loan and spend the next couple of decades or so paying it off. However, private mortgages through funding sources other than banks can benefit clients in certain positions when they’re done right.

Knowing more about private mortgages and other tips for buying a home helps you make a crucial decision from a place of knowledge. Let’s learn more about private mortgages, so homebuyers know all their options and make an informed choice.

What is a Private Mortgage?

The bank isn’t always ready to loan money to people they consider risks. However, just because they deem someone a liability doesn’t mean they are! People with non-traditional income sources need to buy homes too, and they’re perfectly capable of affording them.

Private mortgages are loans offered by a private individual, MIC, or any institution other than a bank or financial provider. Private mortgages can be an excellent alternative for people who need fast funding or have bad credit. A mortgage broker can help you find the right source to loan the money you need at rates you can manage.

Both a first and second mortgage can be private.

When is a Private Mortgage Useful?

Sometimes, banks are reluctant to lend money because the home or property itself is unique or because it’s in a “bad neighbourhood,” as there’s a fear that homeowners may default due to limited resale potential.

However, banks are also less than eager to lend money to homeowners buying cookie-cutter over-supplied suburban homes. Scarcity plays a huge role in that rare things are valued more, and mass-produced homes are in anything but short supply.

Banks don’t tend to like it when a property title is unclear or unorthodox. Stratum titles, company share titles, and tenants in commons titles present risks to lenders because these dynamics complicate a sale down the road.

The more entities listed on the deed, the likelier banks are to feel like they won’t have the first right of priority. If you’re in one of these situations, don’t feel like it’s a dead end.

There may be more options than you realize. The bank is far from the only place to go for funding!

What Are Private Mortgages Like?

While no two mortgages are ever exactly alike, private mortgages tend to be short-term, interest-only loans lasting between one to three years. In an interest-only loan, homeowners have to make interest payments each month rather than pay down the mortgage principal.

For some people, this is an excellent arrangement! However, sometimes figuring out how to replace your private mortgage can be stressful.

The conservative standards banks use to determine loan rates aren’t always accurate. Many people rejected by banks have the means to afford a home. Private lenders emphasize the inherent value of the property you’re buying rather than your credit history, income, or debt levels.

a couple sitting side by side, holding matching keys

Burke Financial is proud to work with private lenders, mortgage investment companies, and investors to help people find the right match to afford their homes. We offer personalized and flexible financial services, so giving a one-size-fits-all response is difficult.

Private mortgages are often easy to qualify for, even though they may be the borrower’s last or close to last resort. Also, there’s no stress test!

Are There Drawbacks?

Just like it’s hard to paint a specific universal picture of what a private mortgage looks like, it’s just as difficult to pin down universal drawbacks. Private mortgages are flexible arrangements designed to meet clients’ needs, let down by more conventional financing paths.

As with any equity-related payment plan, homeowners need to make their minimum payments or at least clear a pre-defined threshold, or they may risk losing their homes.

Plus, the interest rates tend to be higher in exchange for the lender taking a higher risk. Other fees may be added on top of that sum. Burke Financial can guide you through the specifics, so don’t hesitate to call 1-877-709-0709 and speak to a broker today.

What Can You Use the Borrowed Money For?

Anything! You’re borrowing money against your own home, and you can do with it what you want. Because private mortgages are usually for people who have run into financial trouble, your mortgage broker may advise against using the funds frivolously.

Typically, people reinvest their equity back into their homes with renovations that boost their ROI, pay off bad credit, or consolidate loans.

Nobody’s position is the same, so speak to a Burke Financial mortgage broker if you’d like excellent advice.

Why Burke Financial?

There’s more to a great mortgage than the numbers. Burke Financial connects with clients by listening to their lifestyle and financial goals and finds them second mortgages that fit their needs.

After so many years in the industry, our deep relationships across a vast network of lenders help us secure a loan that works. We’ll also work to ensure you understand the answers to common mortgage questions or other more complex issues.

A private mortgage isn’t necessarily the optimal step for every homeowner. If our experienced and professional brokers think a HELOC or home equity loan suits you better, we’ll explain our reasoning step by step until you’re comfortable and confident.

Buying a home isn’t something to be done on a whim and understanding mortgage loans and the various financing tools before you commit long-term is absolutely essential. We’ll find you manageable, affordable monthly terms that give you peace of mind today.

The ins and outs of paying for a home can be complicated, even years after your initial purchase. Your position in life and the real estate market has likely changed over the years, and your strategy may shift alongside it. Burke Financial will help you navigate your home’s purchase, whether it’s through private mortgages or other financial routes.

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