A private mortgage is very different from any other type of mortgage. This is because you do not borrow from a bank. Instead, you are lent money by another individual or another business. It does not matter if it is your last alternative or your chosen option, it is compulsory that you comprehend how private mortgages work. This enables you to know what you should actually watch out for. As you analyze where and the mode of your borrowing, think outside the box. This is because the aim is usually to achieve a win-win situation, where you gain financially without undertaking too much risk.
Risks of a private mortgage
It is clear that life is full of its many surprises. With that, it is good that you know any private mortgage can go bad. It is obvious that every individual has good intentions and a private mortgage usually seems like a great idea when it first comes to your mind. You should take a considerable amount of time to think about the following questions before you indulge deeply into something that may be difficult to unwind.
For a lender you are obviously taking a huge risk. If you are a private or traditional type of lender, such a deal can go sour irrespective of certain relationship issues if you fail to consider the following.
Private mortgage formalities
A given private mortgage should be well defined and documented. Having a loan agreement is the recommended step to take, this is because you will have everything in writing. With a written agreement all parties’ expectations are conveyed so the chances of any surprises are minimal. If you depend on your memory, you are prone to failure. This is because as humans, we are widely biased and we often relay distorted information. So the chances of you getting swindled are heightened. A document will serve you better when it comes to reference.
Documentation is not necessary only for a relationship to stay intact, it protects both parties in the private mortgage deal. This is because the future is something you do not know about. It is advisable that you dodge any legal loose ends from the start. Conclusively, a written document will surely make the deal work more efficiently from a tax perspective.
As you analyze and review your formalities, make sure every conceivable detail has not been left out and that all the details and technicalities are well defined, especially the following.
Securing your loan
It is a recommended idea that you secure the lender’s interest. It does not matter if the private mortgage is among close allies, acquaintances or family members. When you do this, it ensures that your lender can take the property and get some cash back if the worst comes to the worst. Securing your private mortgage with your available assets can also aid you in your taxes.
Pros of a private mortgage
Now that you understand everything there is to know about a private mortgage, give us a call and let us offer you the lowest mortgage rates in Quebec. You have nothing to lose and everything to gain!