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If you’re in a position where you can’t take a loan from a bank, have a less than perfect credit score, or are self-employed, looking for a private mortgage lender is a perfect choice. The best part is these private mortgages are financed through a private source of funds like family, friends, or a business. It’s quite handy for people struggling to get a mortgage the usual way.
There are many benefits of hiring a private mortgage lender, and below we’ll mention 3 ways it can help when purchasing a property.
What is a private mortgage?
A private mortgage is a type of mortgage loan where funds are sourced from another person or business rather than the usual way of getting a loan through a bank or other finance provider. If it’s executed correctly it can benefit everyone involved, however, one must take precautions for the relationship as well as the finances, if things go badly.
Qualifying for a private mortgage is easier since a private mortgage lender will base their decision on the asset used for collateral, as opposed to banks that require a lot of documentation, and sometimes the borrower’s finances may not be enough for the bank’s preferences. Some of the downsides of a private mortgage include higher interest rates, and they’re usually short-term between 1 and 3 years.
3 ways a private mortgage lender can help when purchasing property
Turning to an alternative way of taking out a loan like through family or friends, can be quite beneficial for both sides. There’s a lower interest rate, flexibility in paying back the money, and federal tax deductions.
Private mortgage loans are much easier to get approved and require less time and effort on the part of the borrower. The application is easy, and the mortgage is offered regardless of your credit history. If the property value is high enough and the income from it is sufficient to pay the interest on the debt, the borrower’s financial situation won’t matter to the private mortgage lender’s decision.
Getting approval for a loan from a private mortgage lender will take less time than a conventional loan. The approval might take between 2 or 7 days, and you can also get a fund for your mortgage in as little as 48 hours. This is beneficial if the closing date of the sale and the purchase of a new property is approaching.
No minimum income or credit score requirements
The private lender will place more emphasis on the property rather than the income of the borrower. This would be the best mortgage solution for self-employed people or those who have a non-conventional way of declaring the income. The best part is that even if you don’t currently have a full-time job, you can still qualify.
Often, private mortgage lenders don’t have minimum requirements for the borrower’s credit score since they approve based on the value and marketability of the property. If you’re unable to confirm your income, the private lenders will use the value of the property as security against the loan. Additionally, a private mortgage can help you repair your credit if you keep up with your monthly obligations.
If you have unsecured debt like credit cards, overdue bills, student loans, and such, you can consolidate the debt and reduce your repayment commitments by taking out a private mortgage. This will help you reduce the interest rate and improve your credit score.
By consolidating all of your higher interest rate bad debts into one substantially lower monthly payment you will be able to free up cash flow and pay down the debts faster. These loans are usually granted regardless of your credit score and can help prevent you from being in arrears on future payments.
Risks of mortgage loans
When taking a private mortgage loan one must always consider the risks that come with it. Firstly, introducing a loan into a relationship can be tricky since money can get tight for the borrower thus causing extra stress and guilt if they’re not able to make payments.
Also, note that circumstances can change and the lender’s financial situation may change. You must evaluate the lender’s ability to take on that risk, and whether there are others dependent on them like children or a spouse. Bear in mind that the property value may fluctuate and maintenance can be expensive.
If you’re thinking about private mortgage loans, then make sure you consider all important aspects before committing to them. Think about who would be the best lender, and whether you can overcome the risks mentioned above. Although it’s not an easy task, it’s still quite convenient if you cannot acquire a loan the usual way.
Canada’s Real Estate Bubble Is So Big Even The Mother of All Crashes Can’t Fix It – Better Dwelling
Lack of listings pushes Alberta real estate into a sellers' market – Calgary Herald
Amid the success of the real estate market is a sore spot that could drive up prices more than expected, and that’s low inventory in the coming year, according to one national realty firm.
While the pinch of low supply is most acute in larger centres like Toronto and Vancouver, Alberta is also “feeling the inventory pinch,” says Rachel Rehkopf, spokesperson for Zoocasa Realty Inc. in Toronto.
She points to December total sales rising by 27 per cent in Alberta while new listings remained stagnant.
That “pushed the entire province into sellers’ market conditions.”
The province sits at 2.5 months of residential inventory. That essentially means if no new homes came to market over the next two and a half months, and current demand for housing continues, Alberta would have no more homes for sale.
It’s a scenario that’s unlikely to happen, of course, and the overall supply-demand picture is better in Alberta than other parts of the country, she adds.
In Ontario, for example, supply is 0.6 months while the metric is 1.7 months in British Columbia.
Yet Alberta’s supply is significantly lower than last year when it had four months of supply, she says.
Calgary is the tighter of the two large markets in the province with only 1.5 months of supply, while Edmonton actually added new listings in December, growing by about 10 per cent, year over year. Still, sales in Edmonton outpaced new listings, resulting in a 14 per cent decrease in inventory.
Overall, high demand in both cities paired with continuing low supply will likely drive prices higher in the year ahead, she notes.
Welcome to Real Estate Friday! – theberkshireedge.com
Here’s what we have for you this week in The Edge Real Estate section:
- Property of the Week – Janet Kain of TKG Real Estate offers the opportunity to live in a stunning home, lovingly cared for and perfectly located for year-round enjoyment of the Berkshires.
- Transformations – Designer Jennifer Owen and her clients imagined a calming space to relax while listening to the Boston Symphony Orchestra Live from Tanglewood on the radio!
- Weekly real estate transactions for Berkshire County, Northern Litchfield County and, now, Columbia County
- Market Perspective – Updated this week: The 2021 year-end real estate report from the Berkshire Board of REALTORS. What does it tell us?
- The Self-Taught Gardener – How does Joan Didion’s approach to life and to her art inform our Self-Taught Gardener on how to garden?
- Gardener’s Checklist – The holidays are over and the winter doldrums have set in. What’s a gardener to do to lift his spirits in these dark days?
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