When applying for a mortgage you are likely to get the lowest interest rates if you can qualify for a traditional mortgage. That being said, there are times when a private mortgage makes a lot of sense. In some cases, getting a private mortgage today – even if your interest rates are a little higher – can mean the difference between becoming a homeowner now or waiting years to get into a home of your own.
What is a private mortgage?
Just like the name implies, a private mortgage is a home loan where the lender is a private individual or company rather than a traditional financial institution such as a bank or credit union.
In most cases, a private mortgage is considered to by riskier for the lender which is why interest rates tend to be higher. On the other hand, private mortgages are often interest-only loans with short terms – so your actual monthly payment may not be that much (even though you’ll be paying more over the term of your mortgage.).
When to consider a private mortgage
Private mortgages can be useful tools for a variety of reasons including:
- Bad credit – if you have bad credit, a traditional lender may not be willing to give you a home loan. But private lenders can look at a variety of factors that extend beyond your credit score and will be more willing to give you a chance.
- Self-employment – entrepreneurs often have a more difficult time proving their income than salaried employees, so they can have a hard time qualifying for a traditional mortgage. A private mortgage may be a better option for them.
- Fast approval – If you have to move fast to get the home of your dreams, you may not have time to wait for a traditional lender to approve you for a mortgage. Private mortgages can often be approved much more quickly than traditional mortgages.
- Non-traditional property – If you would like to get a mortgage on a non-traditional property such as a mobile home or tiny home, a traditional lender may be unwilling to approve you. A private lender may be your best option to get a mortgage in this case.
Advantages of private mortgages
Private mortgages have a number of advantages as well that you may not have considered. These advantages include:
- Easier to get approved – get approved for a private mortgage where other lenders might turn you down.
- Fast approval – when you can’t afford to wait, private mortgages can be a good option.
- Flexible terms – if you are looking for a mortgage with unconventional terms, a private lender may be more willing to offer them to you.
Contact Akal Mortgages today!