Truth be told, most people want to stay clear of needing a private mortgage, and it’s 100% understandable. In some cases though it is necessary to get from a Point A to B. When you take out a private mortgage, there are 5 key things that need to be hit on to ensure you are in the best position to get out of the mortgage at maturity. The 5 things are…
#1 PERFECTION OF NEAR REPAYMENT HISTORY
A Private lender is very different from the bank and is not obligated to renew your mortgage at the end of the term. The likelihood of renewal is much greater when repayment history is flawless. A poor repayment record will reduce your chances of being able to transition to a non-private lender with better terms & conditions. Many institutions will look at your repayment history to determine if you will be a risk.
#2 INCOME & EMPLOYMENT
A borrower is not required to keep the lender or brokerage updated with new employment details during the term, however updates are welcomed. It shows that as a borrower you are engaged and looking to improve your situation. Banks have specific requirements that need to be satisfied when transitioning. If they are not met you will be stuck in a private mortgage rut. If you are SELF-EMPLOYED and need to get your income & books in order to transition to a bank, a 12 month term won’t cut it. You need at least 24 months so find a lender that is willing to provide you with a 2 year term.
#3 CREDIT IMPROVEMENTS (IN SOME CASES)
Credit is so important, but impeccable credit isn’t always necessary. If you have some blemishes and you have addressed them, time is what is needed when switching out of a private lender. The most forgotten aspect is the rebuilding. If your credit requires improvement, it is recommended that you work with a credit improvement agency which can assist you in obtaining the necessary credit required to transition to a traditional or semi-traditional lender.
#4. CREDIT INQUIRY RESPONSIBILITY / NEW CREDIT & CREDIT INQUIRIES
It is suggested that new credit isn’t obtained during the term unless absolutely necessary or if you need to rebuild. Try to minimize credit inquiries. New loans & inquires can hinder future refinance efforts.
5. GREAT COMMUNICATION WITH THE LENDER OR DESIGNATED INDIVIDUAL (BROKER)
An open & honest line of communication is very important. A private lender is generally willing to be more accommodating to an honest, proactive, and engaged borrower. An engaged borrower is always at an advantage.
At Amansad Financial Services, we underwrite for a network of 100+ private lenders. We constantly strive to assist property owners’ transition from a bad situation to a better one. If you hit on the 5 keys, you will put yourself in the best position to make your relationship with us and our private lenders short-lived. Contact us today.