Private Mortgage: What You Should Know Before You Borrow
Author:
Lauren NowackiFeb 25, 2024
•8-minute read
Your credit history is less than stellar, or your score is low. Or maybe you want to purchase a home in poor condition and flip it. Whatever the reason, you’re having a tough time getting a traditional loan to buy a house. In these instances, you may be considering a private mortgage. But beware, they may come with risks. Before considering private mortgages, it’s important to know what they are, who they come from and what to be aware of when considering this loan.
What Is A Private Mortgage?
A private mortgage is a financial arrangement between a borrower and a private, individual lender in which the lender provides financing to the borrower to purchase a home. Lenders often offer private mortgages to family, friends or others with personal relationships and generate investment profits from the interest. Some may consider this option because they may not qualify for a mortgage with a traditional lender or may wish to avoid some red tape during the buying process. The loan itself works like a regular mortgage – you must pay back the loan, plus interest, within a certain, agreed-upon time. The lender has a lien on your property, which can be foreclosed if you default on the loan.