What is a Private
Mortgage?

When looking to secure a top mortgage broker in Vancouver, or Canada abroad, there are a few things that you should be aware of before starting down the path.

1. Private mortgage lenders work through private mortgage brokers, so it’s going to be important to be working with a mortgage broker with well developed private lending sources.

2. Make sure that you are clear on the amount of money you are looking for when you apply as it may not so easy to change it later. Unlike a bank, private mortgage lenders are mostly individuals and once they agree to a deal structure, they may not be prepared to change it, regardless of the reason why.

3. Keeping with the last point, when you get an offer of financing or a commitment to fund from a private lender, make sure you are ready to receive it and make a decision right away. Once again, unlike a bank or institutional lender, if you sit on an offer for financing or let it expire and try to revisit it in the future, there is no guarantee that the private lender will be interested or capable of funding the deal. To the last point, private lenders are always in and out of money, depending on their mortgage portfolio. When they have money to lend, they try to get it out in the market as quickly as possible as it doesn’t make any appreciable return sitting in a bank account. So if they provide an offer of financing and you don’t take it right away, there is always the chance that they will place their available funds with someone else and not have funds available for you if you come back to them a few weeks or months down the road.

4. Even though there are a lot of private mortgage lenders out there, you may not be able to turn around and get a similar deal if the acceptance period on a provided offer has lapsed. Especially when time is of the essence, an offer in front of you, even though perhaps not ideal, may be the best offer you’re going to get in the time you have to work with.

5. Be careful not to shop a deal around too much. Especially if you choose to work with more than one private mortgage brokers, there is a risk that the same deal turns up on the same lender’s desk. If that occurs, there is a chance that the private lender will immediately pass on the deal as he or she only wants to invest their time in applications that they believe are ready to move forward. If they get more than one application, the standard assumption can be that the deal is all over the marketplace and the likelihood of placement could potentially be quite low.

Usually, a person will look for a private mortgage when they have been turned down by the bank for a mortgage. Most often, this is because of bad credit, as a bank will look at the equity a person has in their home and that person’s credit history. However, there are reasons other than bad credit that a person may obtain a private mortgage, such as difficulty obtaining the type of loan they want (such as an agriculture loan.) Or in the instance of construction loans, a homebuyer may have already used their first bank mortgage to its fullest extent, and the bank will not provide a second mortgage.  In this instance, a private lender could step in and cover the remaining balance of the construction costs in the form of a private mortgage. These are just a few instances other than a case of bad credit when an individual might seek a private mortgage. In these cases, a private mortgage could be in either the first or second mortgage position, but when referring to getting a private mortgage because of bad credit, they are almost always in the second mortgage position; and that’s because private mortgage companies will require there to be existing home equity in the property.

When a homeowner has bad credit and needs a large sum of money to pay taxes, medical costs, or any other high and unexpected expense, they most likely will be turned down by the bank for a second mortgage. However, provided that the homeowner has built up enough equity in their home, they could obtain a private mortgage from a private lender. This can prove to be especially beneficial when the homeowner is trying to rebuild their credit, as they can consolidate high-interest debt into a lower interest private mortgage. Once the private mortgage has been repaid, they then have a clean slate and can start improving their credit rating again.

Homeowners need to understand, however, that private mortgages typically come with higher interest rates than conventional mortgages. And if you’re using private mortgage lenders because of bad credit, the rates are going to be considerably higher, although still much lower than those attached to credit cards and personal loans. The amortization periods of private mortgages are also usually much shorter, with the life of the loan extending only one or two years.

A private mortgage can be difficult to understand, but it’s because they cover such a broad range and are so uniquely tailored to each homeowner and their needs. The GLM Mortgage Group can be your private mortgage brokers and help you financially navigate especially when a private mortgage is challenging concept to grasp, sometimes that’s why it is exactly what makes them the perfect answer for many homeowners.