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The Pros and Cons of Private Mortgages

Posted by: Lisa Nichols | Apr 21,2008

Private mortgages have started gaining popularity in recent years. With a private mortgage, individuals and businesses can get a loan from an individual instead of a financial institution or a bank. There are a number of pros and cons with securing a loan from an individual.

 

Pros of Private Mortgages: Getting Approved for a Loan from an Individual

 

People who cannot get approved a traditional loan may benefit from a private mortgage. Lenders look at credit history, job history, time at residence and outstanding credit when deciding whether to approve a loan. With a private mortgage, there’s more leeway, since the individual doesn’t have to abide by the same rules as a financial institution- a major pro for many buyers. If a buyer can’t get a loan through traditional outlets, getting approved for a loan from an individual may also be the only option available.

 

Cons of Private Mortgages: Securing a Loan without a Bank or Credit Union

 

There are some cons to securing a loan through a private mortgage deal. Although this is a viable way to get approved for a loan, people who utilize private mortgages may have to pay significantly higher interest rates than they would at a bank. Another con of the private mortgage is that it frequently has terms similar to an adjustable rate mortgage (ARM), where a large payment is due at the end of five or ten years. If the individual getting the loan works on improving their credit report after they secure the loan, they may be able to roll the private mortgage into a traditional loan before the balloon payment comes due.

 

Improve credit reports and increase the chances of getting a loan with a prepaid credit card. A prepaid credit card looks like a major credit card but acts like a debit card. Many of these credit cards report to credit bureaus monthly, so a credit history can quickly improve, making you eligible to get approved for a loan. 

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