Using A Private Mortgage Loan To Get Your Property

Private Mortgage Loans are primarily sought after by Real Estate Investors or (REI’s). Unlike regular mortgages these loans are not traditionally done through banks or lending institutions and their interest rates are generally slightly higher than the national banking rate.

When Real Estate Investors buy a property time is of the essence. Often purchasing foreclosures, distressed properties and bank repossessions in need of renovations, before they can be sold or rented out, means an Investor needs quick access to cash. Private loans can release cash to a Real Estate developer to begin work on properties and ensure quick turn around time for a sale or rental. Often, investors purchase properties that due to either their condition or location, do not qualify for a traditional fixed term bank mortgage. Private mortgage loans offered through private finance companies help to fill the gap.

Investors often go the private financing route, due to speed. Far faster than a traditional mortgage through a bank which with closing costs can take 90 days or more, private mortgages can be done almost immediately. These loans are usually short term, six months to three years, and are not designed to take the place of traditional mortgage, but act instead as a stop gap, or temporary mortgage. The stringent paperwork needed for traditional mortgages is irrelevant in a private mortgage loan. Instead of being based on an individual’s credit rating and ability to pay, they are based instead on the present equity and value of the property in question.

Real estate investors often do seek out a traditional mortgage once a distressed property, typically an income property has been renovated to city by law regulations. Approaching the bank for a traditional mortgage on an income property, will allow an Investor to pay back his private mortgage and assume a fixed rate bank one with minimal difficulties.

First Time Home Buyer