Private Mortgage: What are the Benefits of Choosing Private Mortgages over Traditional Loan Providers?
When attempting to apply for a home loan, private mortgages are an alternative option to the bank you do business with. Banks have many calculations to make when determining qualification for a loan. Application approval can take weeks and leave you very disappointed. Private mortgages are secured with real estate and made possible by private lenders.
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These are short term loans, and are more appropriate for specific situations. The average length of a private mortgage is anywhere between six months and two years. Approval for private mortgages is determined by evaluating the property value being used as collateral. A borrower’s credit is not used for approving or denying private mortgages.
Loans provided through private mortgages are based on security. The amount of the loan should be no more than seventy percent of the properties appraised value. Property that does not produce a profit has a reduced rate of sixty percent. Interest rates on private mortgages are often higher than ones offered through conventional loans by other institutions. The interest rate can be as high as six percent about the prime rate offered by regular banks.
Higher interest rates make it important to weigh all options before choosing to apply for a private mortgage. There are certain situations where a private mortgage can be very beneficial and you must evaluate your needs and research to make a well informed choice between conventional loans and a private mortgage.
If interest rates are high through private mortgages, why would someone choose to use them for a loan? Difficulty qualifying through the normal loan sources is the biggest reason why some choose to apply for private mortgages. The borrower’s credit may not be sufficient enough to qualify for a traditional home loan. This could be due to credit issues, a large amount of debt, or insufficient income from the property. In this situation, a private mortgage may be the only source of funding.
Institutions offering private mortgages only look at the appraised value of the property and do not base their decision on credit history or current debt amounts. Instead providers of private mortgages only look at the value and the properties ability to produce enough income to pay for the loan.
Some situations require the borrower to need to ability to close within a shorter period of time. Traditional loans can take up to ninety days for closing and require property appraisals, thorough research of credit history, and reviewing of all financial documents. Private mortgage lending companies have the ability to close within ten days without all the additional hassles. A company offering private mortgages can often make an approval decision within twenty-four hours of receiving the loan application.
Private mortgages are not as invasive allowing borrowers to better protect their privacy. Current financial obligations and information does not need to be gathered during the application process for private mortgage approval. Less detailed information is required for a loan approval decision. For these specific reasons, borrowers sometimes prefer private mortgages over any other available type of loan.
There are many benefits to choosing private mortgages. As a borrower, your credit does not determine loan approval. Instead approval is based on the value of the property itself. When other financial institutions deny a loan due to credit history, a private mortgage is still an available option.
Closing and access to funds are easier and occur more quickly with private mortgages. Long waiting periods due to credit checks or financial document verification are non-existent. Financial paperwork does not even have to be gathered unless it pertains to the actual property. You might consider a private mortgage in order to obtain the mortgage loan you require.