What are private mortgages and how do they work?
A private mortgage is a loan offered by a group of individuals or a mortgage corporation via private source of funds. Unlike a bank and traditional lenders, private mortgages have shorter terms (1-3 years) and are interest-only.
Interest-only means the borrower only pays the interest and not the mortgage principal down.
While banks and conventional lenders focus on the borrower's credit score, income and debt, private mortgage investors place greater emphasis on the property value and marketability.
Self-employed and gig workers are likely to get a private mortgage because their unconventional income is not recognized by the major banks.
Mortgage shoppers consider a private mortgage when realizing their credit, income or debt might not meet traditional bank requirements.
It's also a viable option for Non-residents, asset rich applicants with no income and poor credit.
Mortgage brokers are typically free to work with for conventional mortgages since the lenders pay their fee, however borrowers have to pay an additional fee for private mortgages. On the plus side, the fee can be lumped into the total mortgage so that it doesn't have to be paid upfront as part of closing costs.
Breezeful offers competitive pricing and rates for private mortgages. You can learn more about us here.
As mentioned above, the property has greater emphasis over the borrower's qualifying criteria. The property should be in good condition, and in a good marketable area, ideally within reach of a city center.
Some private lenders allow as little as 15% down for purchases or refinances. The more down payment though the lower the rate, with the lowest rates at 35% down.
Head over to our mortgage pre approval if you're considering a traditional bank or lender instead.