Private mortgages
A private mortgage can bridge a gap when a bank or credit union cannot approve you yet. We treat it as a short-term step and plan the move back to a regular lender from the start.
- When private lending makes sense
- Costs and fees up front
- Short terms and renewals
- The plan back to a regular lender
Private lending costs more
Private lenders charge higher rates than banks and usually add a lender fee. Any lender or brokerage fee is disclosed to you in writing before you commit. Terms are often one year.
Equity matters more than income
Private lenders focus mainly on the property and how much equity you have. That can help after a credit setback or a recent change in income. They usually lend a lower share of the home's value than a bank would.
Answers
All answersWhat is a private mortgage?
It is a loan from a private lender or mortgage investment corporation instead of a bank. Approval depends mostly on the property and your equity. Terms are usually short, often one year.
How much does a private mortgage cost?
Rates are higher than bank rates, and there is usually a lender fee plus any brokerage fee. Every fee is disclosed to you in writing before you commit. Legal and appraisal costs are extra.
When does a private mortgage make sense?
It can make sense as a short-term bridge, such as after a credit setback or when a regular lender cannot approve you in time. The plan should include how you move to a regular lender when the term ends.
What is a second mortgage?
A second mortgage sits behind your first mortgage on title and usually comes from a private lender. It lets you access equity without breaking your first mortgage, at a higher rate.
How is a commercial mortgage different from a residential mortgage?
Commercial lenders focus on the income the property earns and how well it covers the payments. Down payments are usually larger, and files need more reports, such as an appraisal and sometimes an environmental review.
Is a building with five or more units a commercial mortgage?
Usually, yes. Residential buildings with five or more units are generally financed as commercial, with different programs and documents.