If you have been applying for a mortgage, you have probably come across an option called a private mortgage. A lot of mortgage products are available from different lenders but you need to find one that works for your particular financial situation and needs. Although the majority of home buyers would want to take out a traditional mortgage loan, some people do not qualify for this option. If you are in this situation, you should consider North East private mortgage loans. Keep reading to learn more about these loans:
What are Private Mortgages?
Private mortgage loans are provided by private individuals or institutions that are not banks. Often, they involve shorter terms than bank mortgages, which range from 6 months to three years. Most private mortgages are interest-only and do not require you to pay the principal. Rather, you will have to make monthly interest payments. Those who offer private mortgages give more freedom and flexibility than traditional lenders. Banks tend to be concerned about a borrower’s credit history, private lenders are usually more open-minded and approve based on property values.
Applying for a Private Mortgage
With a traditional mortgage, you will need to complete an application that includes a credit check, employment confirmation, stress test, and lender decisions. Meanwhile, when you apply for a private mortgage, you will have to provide financial information on a form that must be submitted to a broker, so you can get quotes on the loan rates and the amount you may qualify for. You can easily find a private lender online or get recommendations from your family or friends.
For private lenders, mortgages are investment opportunities. They do not make their approval decisions based on your credit history. Rather, they are concerned about your property’s value and how you will pay the loan back.
Traditional mortgages vs Private Mortgages
Read on to know how both types of mortgages differ:
- Interest rate. On average, private mortgage interest rates range from 8% to 18%, which is higher than the rates for conventional mortgages.
- Down payment. Typically, private lenders require a down payment of at least 15 percent of the home’s value. This protects their investment should something go awry. Traditional lenders often require just a 5% down payment.
- Term length. Often, conventional mortgages have terms that last up to ten years. Meanwhile, the terms for private mortgages can last from 6 months to 3 years. This depends on the lender and the borrower’s personal needs.
