Is a Private Mortgage Right for You?
Posted by Garman Group on
Feel like you're ready to enter the housing market? Are you looking at houses for sale? You might feel it's time to buy, but what if you’re having trouble securing a mortgage through your bank or other financial institution?
Does this end your dreams of entering the housing market? Not necessarily.
It might be worth looking into private mortgages instead. Not sure what a private mortgage is? Don’t worry. We’re going to answer all your questions about what they are and if they're a good idea for you.
What Exactly Is a Private Mortgage?
A private mortgage is when a private business or an individual provides someone with a loan to buy a home.
Why Would I Want to Get a Private Mortgage?
Sometimes, it can be difficult to procure a mortgage from a traditional financial institution even if you have the financial means to cover the payments. You might have bad credit history, or you’re self-employed, making it harder to get a mortgage without a large down payment.
Who Can Offer Me a Private Mortgage?
Your prospects for obtaining a private mortgage are only limited by your own contact list! You can look to businesses who offer private mortgages, but these often come with hefty fees or unreasonable collateral.
If you want something a little less "corporate," you could look to individuals — friends, family members, or other personal or business contacts.
What Happens During a Private Mortgage?
The two parties entering into the private mortgage must come to an agreement which details the amount of the loan, any collateral given — often the home deed — as well as the length of time to pay it back and other financial details.
No matter how close you are with the person offering you the mortgage, it’s a good idea to draw up some sort of legal agreement surrounding the terms you come to. Make sure a lawyer reads it or have a notary witness it.
It’s important to put a lot of thought into this agreement. Be sure to outline all the details of your arrangement — no matter how tiny. Chances are this is a loan you'll be paying off for quite a few years, so you don't want to miss anything. You may have to refer back to this document a few times when one of the parties requires clarification on the terms.
Is a Private Mortgage a Good Idea?
A private mortgage can be a very good idea — or a bad one. It depends on the situation.
Having a friend, family member, or business contact lend you the money can be a great idea. They may have the funds available and be willing to lend you the money at little-to-no interest.
But, if anything were to happen, such as you defaulting or your friend requiring the money back faster than expected, your relationship could become quite tense.
Still Have Questions?
No matter how you end up deciding where to obtain the funds to buy a home, make sure you use a reputable MLS REALTOR® like us at the Garman Group. We'll help you through the home buying process from start to finish. Please don’t hesitate to contact us if you have any questions about mortgages, the Victoria housing market, or want to start looking at houses for sale.