What to Consider When Applying For a Private Mortgage
If you are looking for information on how to get a private mortgage you have come to the right place. The right mortgage broker knows how to get a private mortgage and the process is relatively quick and easy. You may not even need a down payment in cash, and there also may not be a credit check. So your mortgage broker connects you with private lenders who are interested in issuing the “paper” on the home you are looking to buy or refinance. The word “paper” refers to mortgages that are created privately and registers at Land Titles Office (LTO). These are popular investment vehicles, because their basis is real estate rather than a stock or bond, which means that the rate of return is much more reliable and the borrower is able to obtain a loan that they may not have otherwise been able to obtain.
How to do a private mortgage
There are 4 factors that influence the marketability of a loan application: the term, the rate of interest, the ratio of loan to value (LTV) and the location.
When assembling the mortgage application, a private mortgage lender wants a short term and a generous yield and interest rate. Private Lenders generally do not want to exceed 12 months, but at times will go up to 3 years or more. In many cases, private lenders will arrange loans over 12 months with an option to renew with a good payment history. Some lenders will have renewal fees attached.
The right rate of interest combined with the right LTV, will be very appealing to a private mortgage lender; making it much easier for Mortgage Investment Corporations (MICS) to satisfy their investor partners, especially if it is a private first mortgage.
Because the ratio of the loan (LTV) is so important, an appraisal by an accredited company is crucial. Be careful when choosing a company; because some private lenders have a designated list of approved & trusted appraisers, contact a mortgage broker and discuss the details of your loan plans.
Private Lenders love to invest in larger cities compared to smaller towns, but no matter where the property is located, if the loan to value ratio isn’t too high then a good broker should be able to place the mortgage loan with someone. For example, a 75% LTV in a major city is more attractive than a 75% LTV property in a rural location. The equity position may be the same, but the likelihood of selling a property in a urban center is much better simply due to the population density. Private Lenders must always consider worse case scenario because the loans provided are higher risk. Borrowers have the right intention, but things happen; so if a lender must foreclose they would prefer a property that can be sold quickly and easily.