Private loans are mortgages that are issued by private parties to borrowers that are investors and usually are in the flipping business or buyers of a fixer-upper that won’t qualify for anything other than a cash sale. It’s also a great tool to avoid foreclosure on your property. Private mortgages are a specialty tool in the toolbox to help borrowers when there are no options available. This tool can be used for business purposes or as a fix to a problem.
Private mortgages most of the time can be tailored to the borrowers’ needs when it comes to terms and prepayment penalties. It is often dependent on the lender and their requirements. Some require credit pulls others don’t. Same with the appraisal, and survey. Although most will lend to a max of 60% loan to value. In other words, if the market value of the property is $100,000 then the max loan amount they will allow is $60,000.
I will provide a few examples below of clients we have helped recently. Now every case is different but for the most part, you will be able better understand how a private mortgage may help you out.
Scenario 1 – Client filed for bankruptcy a few years ago and never paid the second mortgage again.
A few months ago the current holder of the second mortgage called our clients to collect the amount owed which had been accruing at a 13% rate since they stopped paying it. The borrowers contact us at the time the lenders attorney was scheduling the hearing for the foreclosure. Before the hearing could start we had the first and second mortgages paid off, the client received from the available equity$20,000 in order to fix their credit and pay off a couple of collections that were not included in their bankruptcy.
Scenario 2 – Client with bad credit and had to update the property.
A few months ago the current holder of the second mortgage called our clients to collect the amount owed which had been accruing at a 13% rate since they stopped paying it. The borrowers contact us at the time the lenders attorney was scheduling the hearing for the foreclosure. Before the hearing could start we had the first and second mortgages paid off, the client received from the available equity$20,000 in order to fix their credit and pay off a couple of collections that were not included in their bankruptcy.