Although every would-be homeowner or
potential real estate investor is no doubt familiar with the concept of a
mortgage, some may not be aware of the fact that there is more than one option
to consider. A private mortgage is a fantastic alternative to a traditional
bank-funded mortgage for a number of reasons.
When a person takes out a private
mortgage, they’re borrowing from another individual, as opposed to a bank or
other type of traditional creditor. Private mortgages can also be granted to
the future property owner by a company or business.
When set up correctly, a private
mortgage is a win-win type of agreement that financially benefits both of the
parties involved. The borrower gets the funds they need to acquire the property
they want and the lender enjoys a unique opportunity to diversify their
investment portfolio.
What
to Consider Before Choosing a Private Mortgage
As is the case with any financial
decision, a decision to borrow via a private mortgage (or lend, if you’re going
to be the party putting up the cash) should be considered carefully before a
final decision is made. If the borrower and the lender are familiar with one
another beforehand, they should think about:
- How their relationship will change because of the private mortgage
- Whether or not the lender’s financial security will be in jeopardy if something unforeseen happens
- Who may be affected and how should the loan not be repaid for any reason.
It’s also important to address other
practicalities regarding the property in question. For instance:
- What condition the property is in
- Whether proper insurance will be in place to protect the property
- Are any other outstanding financial obligations going to get in the way of the loan being repaid on time
How
to Enter into a Private Mortgage
Whether you’re the borrower or the lender in regards to the private mortgage, thorough documentation is key right from the minute both parties decide the deal is a go. This means drawing up a loan agreement to make sure everything that’s been discussed or decided is right there in writing. The lender must decide how much they are willing to invest and they must be sure that said amount is in liquid form – if not cash, then registered funds, like RRSPs, LIRAs etc. The borrower must agree to a time frame for repayment and be prepared to honor that deal.
For best results, it’s important to work
with a qualified mortgage broker from beginning to end. Mortgage brokers who
focus on real estate investors and private mortgages should generally be able
to ensure proper documentation is reviewed and protect all parties interest. At
Pro Funds mortgages, we help with every step of the private mortgage lending
process from beginning to end. Our team can consult with all involved parties
to determine the wisest course of action. We can also help connect interested
parties to the best possible opportunities.
Once an opportunity is identified, our team
will handle the required documentation process to the benefit of all parties
involved. We then make sure you have access to qualified legal council who will
facilitate the closing process and the transfer of funds.
Get in touch with the team at Pro Funds
Mortgages today and tell us more about what we can do for you! You’re sure to
be glad you did.
The Pro Funds Team
info@profunds.ca
1.888.330.3866
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