If you have had difficulty getting approved for a traditional mortgage from a bank, you may have heard your mortgage broker mention something called a private mortgage.
What is a private mortgage?
A private mortgage is a home loan – just like a traditional mortgage – with the difference being that it comes from a private lender or investor. A private lender may be a lending company, but it may also be a friend or family member who has the means to provide you with a private mortgage. Typically, private mortgages come with higher interest rates than conventional mortgages, however the trade-off may be worth it if it allows you to achieve your dream of becoming a homeowner.
What are the benefits of a private mortgage?
One of the biggest benefits of a private mortgage is that they are easier to get approved for than traditional mortgages. In particular, a private mortgage can be a good option for someone who has bad credit or for someone who has difficulty proving their income – such as an entrepreneur or a new immigrant to Canada.
Getting a private mortgage means, that you’ll be able to move into your very own home sooner and begin building up equity – rather than spend your money on rent and help someone else build up equity.
As you build up equity in your home, you will have even more purchasing power, as in time, you will have enough equity to qualify for a second mortgage or a home equity line of credit.
The other main benefit of a private mortgage is that it can help you to build or rebuild your credit. As you pay down your private mortgage – making regular payments and making them on time – it can help to repair your credit. Eventually, you should be able to switch from a private mortgage to a more traditional mortgage which will carry with it a lower interest rate.
If you would like to learn more about private mortgages and discover whether or not this is the right option for you, contact Akal Mortgages today. A member of our team will be happy to help you.
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