Private
Mortgages Explained
by Katie Sylvester
A private mortgage is a very simple concept - it's a type of
mortgage in which there is no bank or other financial institution actually
securing the mortgage loan. In other words, this type of mortgage allows the
property owner to accept monthly mortgage payments from the buyer directly,
cutting out the financial institution. There are real benefits to everyone
involved in this type of mortgage scenario - the buyer, seller and any other
party eg: an investor. If you are thinking this is a good route for you, take a
few minutes now to find out more on how it works.
How Private Mortgages Are Structured
Anyone can offer a mortgage, not just a bank or even an Investor. This
process does involve securing a legally binding contract, which requires a buyer
to make payments to the property owner over a period. A private mortgage (which
is sometimes called vendor financing), does not have to be a complex process as
any lawyer can set up the actual documents necessary. Each person involved needs
to make specific concessions.
Since this type of loan does work like any other mortgage, each payment is
made towards the purchase price of the property. Unlike a rental situation, the
property owner (seller) is not responsible for making repairs to the property
nor maintaining it in any way. The buyer, or new owner, will be responsible for
this. In effect, this mortgage is no different than other types with banks
except for who is being paid.
How You Benefit
If you are the buyer in the private mortgage, you have key benefits. Today
it can be far easier for someone to get a private mortgage than one from the
bank if they don't quite meet the stringent requirements of today's lending
climate. You may be unable to qualify for a conventional bank loan for other
reasons, but you may qualify for this particular type of loan. It can also be an
excellent way to establish your ability to pay a mortgage so that down the road
you do have other options from financial institutions.
For the seller, vendor financing is a key tool. In today's market where it
is difficult to sell a home quickly, this method opens the door for individuals
who are looking for a way to produce an income from this property and who want
to sell it. It is often easier to find someone to start making payments like
this than it is to sell the property outright.
An investor might consider this option because the property needs
significant work or there are other circumstances with the neighborhood, which
prevent the investor from buying outright. They can make smaller monthly
payments to the property owner, without having to invest a lot of cash into the
property upfront.
In each of these situations, there are key benefits to those involved in a
private mortgage. This method of purchasing a home is often more affordable,
faster and requires fewer limitations. For many people, then, it is the ideal
choice when it comes to obtaining a new loan or moving into a new home.
Investors and sellers see the benefits here, too.
Copyright © 2010 Katie Sylvester. For more information on this
and to see how you can get on the property ladder without needing a bank loan
today, visit
http://www.property-berkshire.com Katie Sylvester is a co-founder of
Property Berkshire, a full time Property Investor & Landlord |
