Pros and Cons of home equity loans

Pros and Cons of home equity loans

There is no need to struggle when looking for a mortgage to achieve your financial dreams. You can experience many benefits when getting a private mortgage, and with today’s lending requirements, private mortgages may be just the right thing for you. Can you save money with a Private Mortgage? Of course.

What Is a Private Mortgage?

A Private Mortgage is a mortgage loan where the lender could be anyone from an investment firm to a family member or friend. The private mortgage lender loans the money just like a bank would, including a contract. If the borrower defaults on payments, the mortgage is insured for the lender.

If you are having trouble securing a traditional mortgage loan, take a look at a Private Mortgage. It is an alternative to a regular loan, designed to help people who can’t qualify for a mortgage. Examples of such people are those who are self-employed, working on improving a credit score, taking some equity, getting taxes under control, flipping houses, investors, or anyone starting a business.

Why Get A Private Mortgage?

Easy to Qualify:
As mentioned before, getting a loan from a regular bank or mortgage lender can be difficult for some people. There are various reasons for not qualifying for a loan. For example, self-employed or young people usually don’t have a steady work history or the credit score the bank or lender needs to see. Besides debt, there are some borrowers whose finances just don’t seem good enough to qualify for the usual loan.

If You Like to Buy and Flip Houses and Property:
A Private Mortgage could be the right choice for you, with the short payback period, if you plan on flipping the house within a six to twelve month period. Renovating a house before you sell can boost the home’s value quickly. This would make the house or property easier to sell quickly.

Do You Like the Idea of a “Fixer Upper?”
When it comes to houses that require extensive renovations and improvements, regular mortgage loans aren’t going to be available. Having good credit for a borrower doesn’t matter in this case. A private mortgage can allow you to fix up the house in a relatively short time so you can sell or refinance.

Private Mortgages tend to have a Quick Approval Process:
Waiting for a regular mortgage loan approval can take around 30 to 45 days, where a private mortgage approval only takes a few weeks. Private mortgage lenders don’t require as many documents as a regular lender for the loan process, because pristine credit isn’t necessary.

Things to Keep in mind

Be aware, private mortgages have a shorter payback period than regular mortgage loans. You usually have a term of six to twelve months to pay back the loan. Private mortgages tend to have higher interest rates than the usual mortgages because there is the need for pristine credit is not there. Many people accept the higher interest rate in exchange for the quick approval process.

Also, arranging a private mortgage with a private mortgage loan lender, or well-trusted friend or family member can be a wonderful idea for your financial situation. It can finance the purchase of a home without costing extra for a “middleman.” Remember this is a substantial commitment financially, so make sure it is in your best interest emotionally and financially.

Some Tips For Making a Private Mortgage Work

Put It All In Writing: Even if your mortgage is with a family member, it is best to document the mortgage loan agreement in the form of a legal document (promissory note) specifying who is owing who how much. It is a good idea to register the loan with the local authorities and IRS. This may cause you to need a lawyer or accountant to get things done correctly. The loan needs to be secured by a mortgage deed. The lender will then be able to take over the property if the borrower defaults or even passes away.

Set Your Interest Rate: A lender need to charge an interest rate in order for the home-buyer or borrower to qualify for the home mortgage interest deduction. The rate will vary depending on which term you decide on, short, medium or long.

Discuss Details in Detail: The mortgage lender and the borrower should discuss all details and instances that could make the agreement complicated, before signing the loan contract. How can the loan be structured to avoid defaulting, and what happens if the borrower misses a payment? A lawyer or attorney can help out here, so everyone can get the most out of the loan agreement.

Keep things Focused and Friendly: If you have a good, close relationship with your lender, you may need a mediator if you get into a tense discussion. You don’t want to risk losing the trust and relationship over financial strain. This is why a private mortgage lender may be better than a family member.

Get a Credit Report: Credit bureaus sometimes have a hard time accepting a private mortgage as part of your credit score. Bring copies of the loan agreement, as well as a letter requesting your payment history to be included on your credit report. There may or may not be fees involved.

Some Private Mortgage Advice

It may help to think of your Private Mortgage as a short term solution to a financial situation. Some brokers will charge high fees, so when you decide on a Private Mortgage, look at the fees and consider the following.

  • Read the full contract, read the fine print. Ask questions if you need clarification.
  • Find a lawyer with experience with private mortgages.
  • Make sure you understand the conditions and all the terms in the contract. Again, ask questions if you need to.
  • Find a mortgage broker with whom you can trust and build a relationship. A good broker will not mind answering questions so you have the best experience possible.
  • If you have a financial advisor, consult to see if you can afford a private mortgage.
  • Have a plan for paying off your private mortgage loan.
  • Use the private mortgage as a stepping stone to build your credit. By improving your credit, you may be able to apply for a regular mortgage.

Find the best Mortgage Term for You: see what is available terms of a mortgage, and get a term that works for you. If you can, consider a fixed-rate mortgage as it will allow you to budget finances easier and save money.

Round up Mortgage Payment: You will save on interest
Shop Around for Best Mortgage Interest Rate: Even with private lenders, you can find the best one for you.
Always make sure to look at your loan contract and see if there is any way you will cause a penalty regarding payments.

With a Private Mortgage, you will get personalized service, with freedom of choice and an easy application process. Speak to your mortgage broker today and see how much you can save with a Private Mortgage loan.

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