When private mortgage financing is mentioned, the first thing that comes to mind for most people is that the borrower has bad credit and there are no other options available to them.
But when it comes to mortgage refinancing, there are other situations where a private mortgage can be the solution of choice for the short term as for the most part, private money is short term money.
For instance, there are times when the mortgage company does not wish to renew the mortgage. Even if you’ve never missed a payment, you could still end up in this situation. If there isn’t enough equity in the property to move to another conventional mortgage product, then a higher ratio private mortgage may be the only solution available outside of selling off the property to retire the mortgage.
With the recent changes to some of the equity based programs for the self employed, there is the possibility that at some point you could not be able to acquire conventional financing due to the requirements around income verification for self employed individuals. And even though you have good credit and have cash flow available, it could be hard to transition from one mortgage holder to another if you were looking to either borrow more against your property, or move to a different property and pay out your existing mortgage.
With respect to bad credit, there are cases where someone’s credit can get bruised from one credit issue which could be very innocent in nature, but still one the reduces your credit score and sees you fall below the threshold for the lower cost mortgage programs.
Instead of signing up for higher conventional rates, it may make more sense to refinance with a private mortgage to provide you with time to clean up the issue with your credit versus getting locked in for a longer period of time with a higher rate.
Depending on the lender, private mortgages can be arranged to allow for open prepayment. And if you have strong cash flow and credit, you can also secure private rates that are close to bank rates.
The key here is the short term nature of the mortgage refinancing requirement.
Working through the numbers can sometimes point to a private mortgage solution, even if that may not seem obvious from the outset.
One way to determine your best mortgage refinancing options is to work with an experienced mortgage broker who deals with both bank and private lending sources.
If you are looking into mortgage refinancing for your home, I suggest that you give us a call and have a member of our team go over your requirements with you as well as potential solutions that are available to you.