Why Does The Idea of Borrowing From Family With Private Mortgage Make Sense?
Low mortgage rate hasn’t been the problem for most borrowers in recent years; it is the strict lending requirements imposed by most of the financial institutions. As a potential home buyer if you face any difficulties in qualifying for a conventional mortgage, you can consider private mortgage. Private mortgages are known as hard money funds, and this usually comes from a private money lenders or banks that are willing to loan home buyers specific amount of money in order to buy a real estate property.
“Playing it safe is the riskiest choice we can ever make.” Sarah Ban Breathnach
Private mortgage loans enable borrowers to get easy and quick access to home markets, and at the same time it also protects money lenders against any loss in case the borrower defaults.
How does a Private Mortgage loan work?
In private mortgage loans, the borrower doesn’t need to pay any additional costs or closing charges. In private mortgage, you borrow money from a private person with enough funds readily available. One doesn’t need to meet any requirements like the traditional mortgage loan. The other terms of agreement, for e.g. rate of interest, payment schedule, amount you need as down payment and collateral for the loan etc depend on the parties involved in a private mortgage loan. In case of a private mortgage, both parties involved in the payment are able to receive benefits. As a lender you will receive a good rate of return for the money and at the same time a lendee can enjoy lower interest rate and good flexibility with the available loan terms.
Situations when you need to consider a Private mortgage:
In private mortgage, the relationship between the both parties is very much important. There should be a trust that both the terms from both parties will be fair and payments are made as per the agreement. However, if you are going to seek mortgage loan from a family, it is important to make the structure of any private mortgage as businesslike as possible. It is also important to consider that the lendee has the ability to pay back the lending amount, and the lender has the opportunity to stay financially intact even if the loan is not paid by the lendee as per agreed. A family based private mortgage loan should not be taken for granted without these basic assurances
Few tips to make the process smoother:
Once you have utilized all your options and evaluated all family drama involved in a private mortgage – and it still seems to be fine with you, then consider some important tips to make the process smoother like cream. For e.g. make a formulated plan and collaborate on the home buying process, get proper documentation, create an easy and proper payment schedule etc.