Five years ago, the least trusted institution in the United States was the used car dealership. Loaded with aggressive salespeople and packed to the core with tricky tactics, misleading offers, and not an isolated sense of conscience, it was the place to go if you wanted to be sold to aggressively. The old stereotype isn’t far from the truth, with the vast majority of salespeople spot on in their character.
Today, however, things have changed somewhat. There’s a new ‘not-to-be-trusted’ enterprise in town these days, and it’s neither a used car dealer nor the usual loan shark. It’s the banks. The world’s big, powerful, and immensely important banking syndicate – amongst it some of the world’s biggest and most valuable companies – ranks fairly low on the average consumer’s list of trusted businesses.
It’s not particularly hard to see why. From Bank of America to Washington Mutual, the foreclosure mess of the last four years took its toll not just on the balance books of many major banks, nor the homes of many American homeowners, but the confidence that many consumers have in their bank. Companies that were once leaders in confidence have fallen behind, with clients leaving en masse.
It’s unfortunate then, that many of the least trusted banks in the United States are also amongst the nation’s top lenders. Offering everything from home loans to automotive financing, the local bank tends to be both the center of our commercial world, and also the center of long-term lending. It’s a catch twenty-two, and the entire nation appears to be caught within its grip.
Thankfully, however, there’s another option – one that more and more consumers are opting to take, often at the expense of dealing with a bank or credit union-based lender. It’s private mortgages, one of several alternatives to a bank-backed home loan. Available from private mortgage lenders, they’re quickly growing into a hot financial option for borrowers unhappy with the current financial world.
In this guide, we’ll be looking at the current state of private mortgage lending – the brokers that you will need to know in order to gain contacts, the deals that are available, the repayment terms, loans and their interest rates, and even the maximum terms of many home and commercial loans. It really is a minefield out there – if you want to be prepared and protected, it’s best to continue reading.
The private lending world isn’t quite as consumer-friendly as the standard world of home lending, at least upon first glance. Short-term contracts, difficult lenders, and large loan expectations tend to be the norm, with consumer appreciation often taking a back seat. It’s a tough exterior, but once you’ve penetrated through it, the world of private mortgage lenders is actually fairly simple to get around.
The best way to do this is through your mortgage broker. While the majority of mortgage brokers interact with lending companies and major banks on your behalf, many have contacts in the world of private lending. This will allow them to network on your behalf, or alternatively pass your own contact details on to a private lender, who will get in touch with you personally.
Before you even consider working with a private lender, it’s important to know what’s considered the norm on the lender and borrower sides of the equation. Unlike home loans from a bank, where terms of fifteen or thirty years are the norm, most private lenders will be unwilling to issue a loan for anything more than five years. This can potentially be off-putting for many borrowers.
Furthermore, it’s unlikely that any borrower can secure a private mortgage for more than a sixty percent value of their property, even after maintenance costs are considered. This is caused by an approach to risk management that’s undertaken by many private mortgage lenders. In rare cases, loans for up to seventy-five percent of the property’s appraised value have been issued to borrowers.
With all of these nasty conditions, all of these disadvantages for borrowers, why would anyone even consider a private mortgage lender? Well, there are several reasons. The first is for privacy, both of the loan itself and of their income information. While a bank would require extensive income proof in order to issue a loan, a private mortgage lender typically requires little in the way of documents.
This is particularly useful for people aiming to conceal their true income, either due to fear of an audit, or due to a legal issue or pending civil court case. It also allows people with a great deal of assets to ‘hide’ their property, or at least fail to disclose it. Whereas this is an issue for obtaining a standard mortgage, it’s rarely considered when seeking a loan from a private mortgage lender.
Finally, there’s the confidence that can come with a private home loan. Over the last four years, the reputation of many major banks has suffered in something of a crisis. By using a private mortgage, borrowers are able to bypass the banking system – the middleman – and operate independently.
Suitable for a home, an apartment, or even a commercial property, a private mortgage is an idea that is considered relatively rarely. Despite this, it’s a competitively priced and relatively valuable option for funding your property purchase, provided the ideal circumstances for a private loan are met.