What you need to know about private mortgages.
Consumers who are unable to qualify for a traditional mortgage from banks and credit unions may need to turn to private mortgages for financing. If this is your case, remember that private mortgages are supposed to be a short-term solution. It can be easier getting a private mortgage, but you may face higher interest rates and fees along with additional conditions or restrictions.
Before getting a private mortgage, be informed of the following:
- A private mortgage is a temporary option for one or two years until your finances improve.
- You need an “exit strategy” to leave the private mortgage and return to a traditional lender.
- Private lenders will often give you a mortgage based on the value of your property instead of your income.
- In many cases you are only paying the interest on a private mortgage. This means you’re not actually paying off any principal.
- Always work with a FSRA-licensed mortgage professional who will help you understand the terms and conditions of a private mortgage.