While a private mortgage is not the common way to finance a home purchase, some people do choose to pursue this route. Following a few simple tips will help make it a smooth arrangement for both the borrower as well as the lender.
Private mortgages are not issued by banks or other well-known financial institutions. Instead, the money comes from a family member, friend, acquaintance or another private source that is not in any way tied to a licensed mortgage broker or issuer. If you’re comfortable with this option and want to proceed with a private mortgage, the following tips will help:
- Prepare professional documents so that both the borrower and the lender have everything in writing. This is very important because you will have proof of the agreement with no room for error or discrepancies. These documents should clearly state the amount being borrowed as well as the name or names of the borrower and the lender. It is a good idea to get a lawyer involved for the paperwork so that it’s done correctly and no details are left out. A lawyer will also help the lender with a mortgage deed to secure the loan should the borrower encounter problems.
- Discuss all matters prior to coming to an agreement and signing any documents. When you borrow money from someone you know, it can get messy, so to avoid any awkwardness it’s better to discuss everything in advance, especially contingencies. This way, you can have a plan in place should the borrower be unable to make payments and everyone will be aware of the plans right from the very start.
- If you feel that things may get ugly, call a mediator to help so that your relationship with that person does not fall apart. Try to keep things civil so that you’re not constantly arguing about money when you see each other.
- Be realistic about this situation. If you feel that your relationship cannot handle a financial arrangement of this magnitude, a personal loan may not be the right choice for you. Remember that when you’re dealing with someone you know on a personal level, there will be emotions involved and you should know beforehand whether you can handle that or not.
For all of your mortgage inquiries, contact Arise Mortgage Corp. to get the best information regarding your next home purchase. Their mortgage specialists will guide you through the steps of a private mortgage and help you decide whether or not this option is suitable for you.