Private Mortgages The Alternative Way Of Refinancing

After the sub-prime crisis of 2007-08, banks and other lending institutes started to put mortgage applicants under intense scrutiny. The economic crisis that engulfed all the major economies of the world was caused because banks approved mortgage loans of those applicants who had a poor history of repaying their debts. 

The global markets might have recovered somewhat, the tight guidelines on who can avail a mortgage loan are still in place. Although the idea behind these regulations is to prevent another financial catastrophe, it has made owning a home a far-fetched dream for many Canadians. Faced with strict requirements from banks and other conventional lending institutions, these individuals are looking at private mortgage financiers to help them with their mortgage refinancing needs.

 Who Gives Private Mortgage Loans?

Private mortgages loans are given by an investor, or a group of investors, who are looking at a higher return on their money. Private lending companies that ask for minimal documentation also hand out mortgage loans to people who cannot avail the mainstream mortgage loans. Private mortgage lenders have relatively lesser requirements to qualify for a loan, which enables a lot of people to avail them.

 Why Apply for a Private Mortgage Loan?

Private mortgage loans work out for people with bad credit scores, and also for those who cannot wait for the long time banks and other conventional lenders take to review the mortgage application. Generally, private mortgage lenders complete the loan application process within 10 to 15 days – a stark contrast from the 60 to 90 days it takes banks to go through the application. 

One of the prime reasons for this is the fact that banks and other lenders look at factors such as the credit history of the applicant, the appraised value of the property that is to be financed, borrower’s current financial state, etc. On the other hand, private mortgage lenders look at only the appraised value of the property to be financed while reviewing the loan application. They use the appraised value of the property as collateral for the loan.