There are many, many reasons why someone might need to use “Private Money Mortgages.” Below are the top 7 and most common reasons.
- Easy to qualify / short approval process – There is far less red tape involved when applying for a “private mortgage”. The lender is much more concerned with property details than the borrowers credit history. Approvals in many cases can happen is just a few hours, whereas with a lending institution it can take days and sometimes weeks.
- Flexibility – Private lenders are more open to lending for unconventional properties ( ie. Vacant land, commercial or even distressed properties needing extensive renovations).
- Short term solution – A private mortgage gives the borrower time to repair and/improve their credit score before approaching an institutional lender. A short term loan also helps the real estate investor who is purchasing a property to fix and then sell, or to fix and then go to a conventional lender for a mortgage with the new appraised value after repairs.
- Self Employed – It is most unfortunate that many people cannot qualify at the major banks because they have “self-employment” income. But the good news is, that a private lender is not concerned, because it is the equity in the property that is used to qualify a borrower. The actual property is needed as the security against the mortgage loan.
- If you have Bad Credit , borrowing from a major bank is not an option. But this is never a problem for a private lender, as long as you have a property with equity.
- Major banks do not focus on Second Mortgages for the purpose of Debt Consolidation , so once again the obvious choice is using private mortgage funds to help you get back on track using a second mortgage to pay off high interest debts such as credit cards.
- New Immigrants to Canada quite often arrive here with money for a down payment on a property, but because they have not yet established any credit history in our country, they cannot qualify for a conventional bank mortgage. Rather than waiting to purchase, they can use a short term private mortgage, while they are establishing a credit history.
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