A private mortgage is a short-term unsecured loan with a term of about one to three years. There are many reasons why one might consider taking a mortgage. It could be because private mortgages have faster rates of approval or they don’t pay much importance to credit rating or could be because of the borrower’s source of earning. Whenever you are planning to take a private mortgage, it is best to reach out to a Certified Mortgage Broker who helps you find the best lenders offering private mortgages. Before taking a private mortgage it is best to understand the nitty-gritty of it.
When should you consider taking a private mortgage?
When you are planning to take a loan, there are many situations in which the conventional lender might not approve of it. When your credit history is not great, that it is below 600, then you might not qualify for a conventional loan. Even when you are investing in an unconventional property, the banks might not be too keen on providing you with the funding. Conventional lenders aren’t the biggest fan of providing mortgages to those who are either self-employed or are unable to prove their current income. It is best to consider taking a private mortgage. It is also a great option when you don’t want to go through a lengthy approval process or you need a loan for a short time.
What are the interest rates paid on a private mortgage?
Private mortgages have a higher risk. Hence, they have a higher interest rate. The interest rate on the mortgage varies from 10% to 18%. The rate of interest which is charged is dependent on the property and the circumstances of the borrower. If the risk of lending is higher, they will charge a high-interest rate. The rates are also subject to change per the economic condition. The type of lender and rate of return also helps in determining the interest rate.
How long is the wait for approval?
The time taken to approve a private mortgage is a lot lesser than the time taken for a conventional loan. The approval takes about two to seven days. Once the approval has been given, you should receive the amount in two to three weeks.
What are the factors that Private lenders take into account?
Before lending you the money, the lender will be looking at certain aspects. This will help them to decide whether they should lend you the money or not and the interest rate to be charged. The very first thing that they take into account is your income. If you can’t confirm income, the lenders will draw an estimate based on the industry average. The second is the property value. The lender will require an appraisal as the property helps to secure the loan. Third, Down payments need to be at least 15% of the loan to value the ratio of the property must be at least 85%.