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Sunday, 4 March 2012

Private Mortgages aka Saving the day...

What is a private mortgage?A private mortgage is essential the same as a bank mortgage except the lender is a private individual or company. The terms and conditions of private mortgages are similar to that of bank mortgages, however costs related obtaining one and the rates are higher. The rate is negotiated for you by a Mortgage Broker!
Factors affecting rate and fees include:
    Credit Report, history- Down Payment- Net Worth-
    Loan to Value- Type of Property- Location, age of PropertyIncomeTypical first mortgages range between 9% and 13%. Second mortgages range between 12% and 16%

What fees are involved?You will be required to pay an appraisal fee (approximately $350.00), legal fees (approximately $1,500.00) and a mortgage broker fee (approximatley minimum $3,000.00 maximum 5%-15% of mortgage transaction). Other fees, such as a building inspection fee are rare but also may be applicable.
There are a number of reasons why borrowers require private mortgages:
Speed of closing the transaction!

Bank mortgages generally take 20 to 30 days to close. Private mortgage transactions can close in as little as 4 to 10 days.

Short term or bridge financing needed!
Banks generally are not interested in short term or bridge financing no matter what the rate. For a rate premium, private mortgage lenders/investors will finance these transactions.

Borrower wishes to avoid CMHC fees CMHC fees on bank mortgages can be massive!
Private second mortgage financing to avoid expensive prepayment penalties on a refinance of an existing first mortgage.
Borrowers with an existing first mortgage may wish to make renovations and upgrades to their property. Funding these renovations and upgrades through a refinance of the first mortgage could cost the borrower thousands of dollars in prepayment penalties. A short-term private second mortgage to finance these renovations and upgrades could save the borrower thousands of dollars in prepayment penalties. Also there are numerous reasons, like invest in revenue generating properties, start up business venture and likes.

Second mortgages for debt consolidations!
In society today, it is easy for credit card debt to get out of hand. Property owners, who have equity in their home, may wish to consolidate expensive 18% to 28% credit card debt into a second mortgage at 12-16%, repair credit and get back to regular low rate bank mortgage financing thus saving thousands on the long term.

Borrower may not qualify for traditional bank financing!
Private lenders will finance what the banks won’t. Banks generally have a strict protocol they must follow. Bankers may not be allowed leeway for personal judgment and assessment, even if the deal makes sense. For example, many borrowers are self-employed and generate large sums of revenue but show minimal income on their tax return. Borrowers may also be on a fixed income or asset rich and income poor so they do not meet the banks strict debt servicing ratios. Bank assessments of borrowers are generally heavily based on their credit report. Many borrowers may have a one time nonrecurring credit problem that can be explained. The banks generally will not take this into consideration.

Property may not qualify for traditional bank financing!
Banks generally shy away from financing commercial and income properties unless they are located in major cities. Private lenders/investors individually assess these properties and will provide financing if the transaction is deemed to be secure.

Using the services of selected Mortgage Brokerages involved in Private Lenders funded mortgages is allways your best bet. They are experienced in to secure you the best rate, fees and provide you with a Solution and a plan along with advices will guide you in this sometimes hard to follow process.
Before you go about to look for a private mortgage, please consider to get a FREE Advise!!!