Private Mortgage Tips & Advice to Help You Save
A private mortgage can be a good solution for those who wish to purchase a home but who cannot qualify for other more traditional types of mortgages. But to make a private mortgage arrangement go as smoothly as possible for everyone involved, there are a few tips that you should follow:
- Make sure everything is in writing.
This tends to be more of an issue if you are getting a private mortgage with a family member. Remember that a mortgage should never be a “handshake deal” – it should always be formally put in writing. The mortgage deed should secure the land. This allows the lender to take possession of the property should the borrower default.
- Agree on an interest rate.
If an investor is the lender in a private mortgage, then the interest rate will most likely be set. But if the private mortgage is a family affair, paying interest is something which you may not have discussed. It is always recommended that the lender charge at least some interest so that they can beat inflation.
- Discuss contingencies
In a perfect world, nothing would go wrong with a private mortgage – but in real life things happen. That is why it is important to discuss contingencies when you enter into a private mortgage agreement. For example, what happens if the borrower runs into financial difficulties? Will you be able to restructure the loan to avoid default? Deciding these issues ahead of time has the potential to save you a lot of headaches and possibly hefty legal fees in the long run.
- Get credit
If you are getting a private mortgage through a friend or family member, don’t forget that you will still want to have your payment history on your credit report. This will help you improve your credit score making it easier for you to transition into a conventional mortgage in the future if you wish to. Do this by sending copies of your mortgage agreement to TransUnion and Equifax along with a letter asking them to include this on your credit report. They may request a fee for doing so, but the boost to your credit rating will be worth it.
- Work with a mortgage broker
You may think that if you have personal relationship with the lender that you do not need to work with a mortgage broker but this is a mistake. When you work with a mortgage broker, they can help you make sure that all of your paperwork is in order and that both parties are protected.
Contact 1Onefund Financial today
If you are considering a private mortgage, we can help. Contact 1Onefund Financial today to speak to a member of our team.