What Are Private Mortgages?
Private mortgages, quite simply, are mortgages that are lent and held in Private. They are financed by private money held for loans and mortgages. Sometimes, this private money is called hard money to differentiate it from investments, securities, and barter. Private mortgages are not offered by Banks, Savings and Loans companies, Insurance Companies, and commercial companies, but rather from private citizens. Sometimes, private mortgages are funded by trusts, associations, or retirement funds. Anyone with cash and a little business and legal knowledge can offer private mortgages. Private mortgages can be a great investment, since there is great security with the equity on a house. Even if a debtor reneges on contract, the house can be used to help pay off the mortgage. 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. It is also an easy investment to make - private mortgages require little baby-sitting or watching of an investment. Money is paid regularly and the lender is fully covered by the legal documents signed at the time of the mortgage, ensuring that the investment as well as a profit is collected from the deal. 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. Homeowners turn to private mortgages for many reasons. Some oppose or mistrust large corporations with their money and many private lenders offer a personal and face-to-face contact that is reassuring, especially for first-time home buyers. Not all private mortgages are high interest - some do offer good rates. Ins some cases, homeowners turn to private mortgages if they simply are a very poor credit risk and cannot get financing elsewhere. It is always possible to look at private mortgages first - such as when mortgage rates are favorable - and then switch to a non-private mortgage with better rates as one's financial status improves. In some cases, this is not necessary - since lenders of private mortgages have lots of control over the money and rates they lend, they often can negotiate on case-to-case basis with creditors in a way that larger corporations tend to avoid. Finally, there are usually no greater risks with private mortgages than with other types - the same legal documents that protect the lender can also protect the creditor. Just make sure to have a lawyer look over any contracts to make sure you are protected in any private mortgages.