Are you aware of that type of loan called private mortgage? This type of mortgage is one where you will not actually borrow the money directly from a bank. It is more of transacting with another individual or a business organisation. You might presume that this mortgage is simply understood with that explanation. Beyond that however, you have to understand it fully before availing of it so you can create a win-win situation for you.
There are risks that come with private mortgages
You may be shocked to read this statement as the first thing you will need to know when it comes to understanding what private mortgages are. Well, we have to explain this for you to picture the entire scenario better later on. As with any other mortgages, a private mortgage comes with good intentions on the part of the lender but in many cases there are risk factors that may affect that good intention.
Think of it this way. The private mortgage originates from your friend – he being the lender and you being the borrower. With that, you can say there is already a good personal relationship between the two of you. In case you default on payments in the long run, will your relationship be greatly affected? That would be a given especially so that you have already been friends with that person for many years now. We would presume many years because no person would lend you money unless of course you have been friends with him for a long time.
Private mortgages also come with other concerns
Aside from the above concern, you would want to know too if there are any other persons or businesses that will be involved in case the amount of the loan is not repaid. Whether or not there is a relationship between you and the other party, the deal can actually go wrong and the entire thing can go bad. Things like the property’s conditions or interests that are in conflict with the lender’s interest should also be brought to mind.
A well-documented private mortgage will be of help
If you want to address concerns that come with a private mortgage, it would be good if you always make sure that the agreement is well-documented. A verbal agreement will not work, regardless of the amount involved in the transaction. A loan agreement should better be in writing since this will document the expectations of both parties. At the end of the deal, you will not be surprised by anything that will arise from the transaction.
A well-documented private mortgage will also guarantee that you will not forget anything no matter how long the term of the mortgage is. In all cases, both parties should have a copy of the agreement that will lessen all the hassles when compared to just keeping the agreement in memory. This will keep both parties protected at all times thus making you both avoid any legal issues later on. It can make both ends meet.
Make sure the agreement contains salient facts that will make the private mortgage work
If you want a win-win situation then it would be best to make sure the agreement specifies the things that need to be met in accordance with the private mortgage. These facts should cover aspects that will benefit both the lender and the borrower. Facts like due dates for each payment and penalties for non-payment should be specified in there. There should also be an indication on how payments should be made and whether or not you can prepay if you are the borrower. Any collateral used to secure the loan should likewise be stipulated in the loan agreement.
Secure the loan
Putting you and the borrower in a win-win situation would include securing the loan with properties or with any other assets that the lender can run after in case you default on payment. This should likewise be included in your agreement. Securing the loan with such things will also help you save much on taxes that you will need to pay for later on.
Ask help from expert private mortgage providers
A private mortgage will work best when provided by expert mortgage providers. After all, you would not want getting your personal relationship with your friends and family affected by money issues. A business organisation or a private mortgage lender can help you with everything from the queries you have to documenting the mortgage. They can even explain all rudiments clearly to you.
Speaking of hiring trusted private mortgage providers, you can count on us. We are more than willing to explain to you how our system works and which type of loan will work to your advantage. Feel free to contact us for any of your concerns regarding our products and services. Let us make private mortgages work in a win-win situation.