Let’s take a look at the Top 6 Benefits of Getting a Private Mortgage. Are you looking to buy your first home? With the Canadian real estate market getting a boost from the pandemic, finding a house may not be that hard. The financing, however, is a different story altogether.
The problem of choosing between a bank loan and a private mortgage remains. Both options have their pros and cons. However, you may find a private mortgage to be more suitable for many reasons.
If you’re wondering if applying for private mortgage financing is worth it, continue reading below. Let us dissect the top benefits a private mortgage has to offer.
1. Easier to Qualify
There are many reasons why a traditional mortgage lender may reject your application. These lenders follow strict guidelines when it comes to checking your credit history.
On the flip side, a private mortgage offers a more lenient application process. Whether it is a private first mortgage or a private second mortgage you’re applying for, you will have a fairly easy time when it comes to the qualification process.
Private mortgage lenders have more independence compared to traditional banks. They can streamline the pre-approvals to accommodate first-time home buyers and regular real estate investors alike.
Unlike banks, private lenders use a holistic approach in assessing borrower risk. They try to eliminate all the red tape that comes with all the processing and paperwork. Because of this, they can give you a more suitable mortgage that fits your specific requirements and current situation.
Instead of zooming in on the details of your credit history, they put more attention to the value of the property that you are looking to buy. They also examine your current income, your assets, and your ability to pay a mortgage.
2. Better Interest Rates
Another key benefit of dealing with private mortgage lenders is they can give you better interest rates. Banks and traditional lenders generally stick to a single set rate. This means there’s not much you can do in terms of adjusting the interest rates of a bank loan.
On the other hand, private mortgage lenders can offer you a wide range of interest rates. They can give you rates that will not hurt if you’re looking at a long-term loan. They can also accommodate shorter loan periods and adjust the interest rates accordingly.
3. Quick Financing and Disbursements
Apart from quick pre-approvals, you can also expect fast financing and disbursements from private mortgage lenders. Since you will not go through the red tape that comes with conventional lending options, you can receive the money faster.
Interestingly, some loan applications can get the green light within the day. As long as you provide all the information to the lenders, they can expedite the financing of your loan. This is beneficial, especially for people who are rushing to transfer to a new home.
You get to purchase the home that you want and get the ball rolling early when it comes to your actual transfer.
4. A Private Mortgage is Flexible
Because stringent guidelines do not cover private mortgage lenders, they can offer more flexibility when it comes to the terms and options of your loan. For starters, they can give you some of the friendliest interest rates possible.
They can also compute for the payment terms that will not feel like a burden. Also, they can accommodate loan applications from self-employed borrowers. Keep in mind that it not only the regular employers who are looking for homes.
People who quit their day jobs and put up their small businesses may also be house-hunting. The problem with this when it comes to traditional mortgage is their income. Since self-employed people may have irregular or unverifiable income, the banks will have second thoughts in approving their loan applications.
However, a private mortgage lender can offer you a mortgage even if you’re not a regular employee. Moreover, this allows you to build your credit score and stabilize your cash flow in the process.
Additionally, the larger the down payment you give, the more flexible payment terms you can enjoy.
5. Opportunity to Build a Relationship
Unlike traditional lenders who stick to a set of rules, private mortgage lenders use a more personalized approach when dealing with borrowers. With no stringent rules to limit their offerings, they can provide more personalized attention to their customers.
In turn, you can build a lifelong client-customer relationship with your lender. As you build your trust with one another, you can retain them for your future loan requirements.
By honoring your terms, you can establish a solid relationship. From there, you can open up investment opportunities in the future.
6. You May Avoid a PMI
Last but not least, you can avoid paying private mortgage insurance (PMI). Generally, private insurance companies require borrowers to pay a certain amount for PMI. The PMI is there to protect the interests of the lenders.
You will shoulder this amount if you’re paying the lender less than 20% of the money you need to purchase the house. If the down payment for the house is below 20% of its total value, you will have to pay the corresponding PMI fee.
However, because of the flexibility of a private mortgage, there is a way to avoid paying the PMI. Apart from paying the 20% down payment, there are a few lenders that do not require a PMI. Instead, they will apply higher interest rates to your loan.
Alternatively, you can take the “piggybacking” route. This involves applying for a smaller loan to cover the 20% down payment.
With the smaller loan covering the down payment, you will no longer need to worry about the PMI. However, you need to ensure that the interest rate is lower than the PMI premiums.
Let’s Work on Your Private Mortgage Today
With our top 6 benefits of getting a private mortgage, you can secure that first home without complications. However, you need to find the right brokers who can guide you in every step. Thankfully, you came to the right place.
We offer an extensive selection of mortgage solutions for all sorts of homebuyers. Connect with us and tell us more about your mortgage requirements. Apply now and take the first step toward getting the home you deserve.