1) When should a homeowner consider a private lender when searching for a mortgage?
Lenders come in a lot of different packages. The private lender is a good choice for situations where the borrower is unable to qualify for a traditional mortgage due to not-so-good credit, self-employment, or other issues. People in the business of house flipping frequently use a private lender because there is a very short period to complete the approval process and to close the deal. There could also be a situation where a family member or close friend is interested in lending money for a real estate purchase as an investment. The lender knows and understands the borrower’s situation and is willing to trust in the results.
2) What sort of interest rate should a person expect to get on a private mortgage?
In general, interest rates on private mortgages are higher than with a traditional loan. Since the borrower frequently does not have a sufficient credit rating, the lender feels they are taking a chance and need to include a little cushion. There are other factors like the location of the property, i.e. whether it is located in a high-crime area or a neighbourhood that has declining property values and the general condition of the house. Fixer-uppers are more of a risk because the homeowner will need additional cash to complete the renovation. At this point first mortgage interest rates by private lenders start at 6.99%. Second mortgage interest rates start at 10.99%.
3) Is now a good time to borrow money with a home equity loan?
With home equity loan rates at an all-time low, this is a great time to apply. If you have accumulated some higher rate debt, using the equity in your home is a good choice to consolidate, reducing the amount of interest payments in the long run. It is also an option to invest in the future, like making some improvements to your property to increase resale value or to invest in a college degree. Just be sure to understand all the terms and conditions in order to avoid unscrupulous lenders who are waiting to take advantage of the uninformed.
4) What are the benefits of a private mortgage?
Actually there are a number of good reasons to opt for a private mortgage. Accessibility is one of the prime reasons. Closings are efficient and speedy. There is significantly less paperwork and private lenders are more considerate of less-than-perfect credit records or situations where it is difficult to substantiate employment records. Private money is readily available and the source is generally a local individual who knows the value of the property to be purchased. Everything is spelled out; there are no hidden fees. If you are interested in establishing a long-term relationship, private investors are the way to go.