Second / Private Mortgage
A private first or second mortgage can improve your financial well being!
A private first or second mortgage can improve your financial well being! Its not just an expensive means to an end.
As a reputable mortgage agent/broker, I will advise you when your circumstances require you to enter into a private first or second mortgage. I will also advise a financial action plan to refinance your mortgage down the road to return you to the prime lending marketplace.
When a borrower doesn’t meet the prime or alternative lender’s lending criteria, a private mortgage may be arranged as a temporary solution usually ending with the result of qualification with a “prime” lending institution at better rates and terms.
Consider this scenario to explore why a private mortgage can work for you.
You worked for the same company for 10 years, they went bankrupt and shut down, it took you 9 months to find another job, but in the meantime, you used up all your savings as your EI payments weren’t enough. Payments are behind on your $40,000 worth of debts which cost $1000 monthly (minimum payments), and you owe $10,000 in property taxes and CRA. Your house is worth $500,000, your current mortgage is $200,000 you need $50,000 to pay it all off plus $5,000 (estimated) to set up of a second mortgage including legal fees. It makes sense to retain your 2.99% first mortgage in order to give you time to restore your credit history and income. Therefore, a private second mortgage suits the situation. A second mortgage of $55,000 with interest only payments at 12% will cost you $537 monthly, creating a savings of $463 monthly plus CRA and property taxes are paid off.
The plan is that in one to two years, you will refinance your home to pay off both mortgages with a prime lender including better rates and the only cost may be legal fees.
Some other reasons to borrow private funds.
• purchase property where you don’t qualify with more “traditional” lenders
• pay off/consolidate debts to improve cash flow
• renovate your home
• pay for medical expenses
• supplement your first mortgage
• improve cash flow
• pay off debts to CRA or property taxes
• pay for your children’s post-secondary education
• you don’t qualify under new mortgage rules and need a “top up” for your purchase
• the home has “special” features that an institutional lender will not accept or location
• new construction
Yes, private mortgages do have higher rates and fees, however, your mortgage agent is obligated to ensure that all parties to the transaction are fully aware of all costs upfront and fully explain the reasoning behind choosing a private mortgage. As a mortgage agent I will outline why you don’t qualify for a prime or alternative lender at this time and review the financial benefits of entering into a private mortgage. I will also explain the exit strategy to pay off the private mortgage down the road with the goal to get you back into the prime lending market.
Contact me to find out if a private mortgage is right for you!
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Whether you are buying your very first home, upsizing, downsizing, or refinancing, I can find the right fit for your unique financial situation.