What are private mortgages? Private mortgages, which are often called trust deeds or “hard money” loans, are as legally binding as a mortgage issued by a bank. With the banks strict lending policies many borrowers are turning toward private mortgages to fund real estate transactions, like wise, with unpredictable market returns, investors are looking at private mortgages as an alternative investment opportunity. Private mortgages can be a great investment, since there is great security with the equity on a house.
Many private lenders make considerable money from private mortgages by charging interest rates up to eight percent – or even more, in some cases – over prime. Since private mortgages are so good for investors, many think that they do not offer a great deal for homeowners, but this is not always the case. Variations on private mortgages include lease-options and “rent-to-buy” agreements, where a certain portion of the monthly rent applies towards purchase. Some third-party private investors also offer private mortgages simply as an investment vehicle, because it is often possible to charge a rate of interest significantly above prime – especially if the buyer is not able to qualify for a conventional mortgage due to poor credit.
Private mortgages are funded by individuals or groups who want to make a better return on their investment than 2% in a gic at their bank. Private mortgages provide the highest yield for savvy investors. The advantages of a private mortgage areprivate mortgages are asset based mortgages, so their is no income verification. Private mortgages are fast, and they can be settled on as little as 7 days. Private mortgages also have no break costs, and can be repaid anytime with 30 days notice. The disadvantages of a private mortgageprivate mortgages have about 3% premium on standard bank mortgages.