Private mortgage financing can be tricky, whether you are a Mortgage Agent, Mortgage Broker or a consumer looking for this type of mortgage financing. Typically people who need private mortgage financing don't qualify for financing through institutional lenders for one of two reasons:
1. They have problems with their credit
2. They cannot prove their income in a way that is satisfactory to an institutional lender
The reason private mortgage lenders offer private financing to folks who have had problems with their credit or who cannot prove their income is because they are not lending the money based on the integrity of the borrower but on the integrity of the security. Private mortgage lenders will determine the amount of the loan based on a percentage of the appraised value of the asset.
Generally, private lenders prefer to lend money on properties located in or around cities (as opposed to rural route properties) and will require sufficient equity in the property so that if the borrower defaults they can get their money back through the sale of the home. Usually private lenders will loan 75%-80% of the value of a home.
The beauty of private mortgage financing is that private lenders are generally very flexible as long as there is equity in the property that will be used for security, so for example, if your property was not in a desirable area or in a desirable condition, the private lender may still offer private mortgage financing on the basis of the equity the applicant has in the home, the more equity the better.
There are different types of private lenders, ranging from individual people who are just looking to earn some additional investment income all the way up to organized groups of investors who offer private mortgage financing as a business. It is usually recommended to obtain private mortgage financing through a mortgage broker who specializes in private mortgage financing, even if you are another mortgage broker or agent.
One reason for this is that you want to be able to preserve your relationship with your client. Private folks, especially seniors, who loan money through their solicitors can be unreliable when the changes to life occur. Private mortgages are generally renewed annually. This unreliability could include the private individual not wanting to renew the mortgage in the future because their financial situation changes and they need their money back or perhaps they pass away and then what?
Working with a Mortgage Broker who has an organized process for arranging private mortgage financing, administers private mortgages that they arrange and work with their private lenders in volumes will help you to avoid unreliability with the private mortgage lenders you place your client with.
Private mortgage financing is a fantastic tool that can be leveraged by individuals to achieve many financial goals including debt consolidations, renovations and more. Private mortgage financing really helps the people who need it most but the key is to find the right private mortgage financing from the right private mortgage lender.