Almost all mortgages originate with a bank or financial institution. In some cases however, a private individual, a seller, or an investor may choose to hold a mortgage directly. This mortgage structure may bring several advantages to buyers, sellers, and third party investors. It is possible for anyone to offer a private mortgage, you dont have to be a bank, or even a real estate professional.
The main reason anyone turns to private lenders is because of bad credit and/or being turned down for a loan with a bank. Private mortgages are often necessary for property zoned for farming, as conventional banks tend not to fund farm land.
PROS: HIGHER INTEREST RATES ON INVESTMENT SHORT TERM INVESTMENT MORE LUCRATIVE THAN STOCKS/MUTUAL FUNDS CREATIVE CHOICES/CONTROL OVER YOUR MONEY
PROS: OPTION TO SELL THE MORTGAGE TO COMPANIES IF YOU NEED TO EXIT INVEST SECURELY IN REAL ESTATE WITHOUT HASSLE CONTROL OVER LENGTH OF TIME YOUR MONEY WORKS FOR YOU
PROS: SECURED- MORTGAGES IS REGISTERED ON THE BORROWERS HOME REMEDIES AVAILABLE (POWER OF SALE/ FORECLOSURE)
CONS: RISK THAT PROPERTY VALUE MAY DECLINE BASED ON THE ECONOMY RISK OF DEFAULT – DEALING WITH PEOPLE WHO COULDNT GET CONVENTIONAL FUNDING MAY HAVE TO INITIATE POWER OF SALE MAY BE IN SECOND OR THIR PLACE
PROS: NO CREDIT CHECK NO QUESTIONS ABOUT WHAT THE FUNDS ARE FOR QUICK CAN ALLEVIATE HIGH INTEREST DEBT FOR EMERGENCIES (FUNERALS) HOME RENOVATIONS
CONS: ANOTHER MONTHLY PAYMENT HIGH INTEREST RATES SHORT TERM- HIGH RENEWAL FEES CAN END UP OWING MORE THAN PROPERTY WORTH REGISTERED ON PROPERTY- MUST BE PAID ON SALE REGARDLESS OF TERM
EXAMPLE: YOU HAVE A PROPERTY VALUED AT $100,000.00, AND YOU LEND $70,000.00 FOR A ONE YEAR TERM. LENDER FEE OF $5,000.00 AND INTEREST ONLY AT 15% PER ANNUM, ON A MONTHLY BASIS. YOU WOULD RECEIVE $875 EACH MONTH OF THE YEAR. TOTAL PROFIT OVER THE ONE YEAR TERM = $15,500.00 ($10,500.00 + $5,000)
SEARCH PROPERTY WITH LAND REGISTRY OFFICE TO CHECK FOR REGISTERED MORTGAGES, LIENS. SEARCH BORROWER WITH LAND REGISTRY OFFICE TO ENSURE NO JUDGEMENTS AGAINST HIM/HER GO OVER THE TERMS AND RENEWAL TERMS IN DETAIL WITH THE LENDER & BORROWER. FORWARD BROKER FEES AND LENDER FEES COLLECT POST DATED CHEQUES FROM BORROWER FOR LENDER
REGISTER THE MORTGAGE WITH THE LAND REGISTRY OFFICE TO SECURE IT PROCESS THE FUNDS THROUGH A TRUST ACCOUNT FORWARD THE FUNDS TO BORROWER ARRANGE TITLE INSURANCE TO PROTECT LENDER AGAINST TITLE DEFECTS/FRAUD DISCHARGE (REMOVE MORTGAGE FROM LAND REGISTRY OFFICE AND FORWARD PRINCIPLE TO LENDER
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