Choosing to get a private mortgage on your Hamilton home is a big
choice, and should be done thoughtfully. When considering any large financial
investment, it is important to weigh the pros and cons. Private mortgages are a
fantastic choice for many people, but can also be irresponsible for some.
Pros
- Disregard for credit score – Unlike mortgages that come from a bank, a private
mortgage lender will very rarely limit your mortgage loan depending on your
credit score. This can be a pivotal choice for many people seeking a mortgage,
as a poor financial past can ruin a better financial future. Having a private
mortgage can be the first step many people take to a stronger credit score, and
can be the jumpstart people need.
- Investors Welcome – Private mortgages offer much more flexibility with
timelines than traditional mortgages do, which can be a great benefit for
investors of any kind. Many banks will not offer promising mortgage options for
investors looking to buy a house needing multiple renovations. Run-down housing
has a low property value, and is typically found in neighbourhoods in serious
need of gentrification; this means that banks view their money lending as a
risk and will attempt to limit it. Private mortgages on the other hand do not
penalize investors for purchasing a low quality home, and in turn are their
first choice.
- Flippers Wanted – Similar to investors desiring private mortgages, people
who choose to "flip” a house can have great success with a private mortgage.
Banks heavily benefit from mortgage periods being very long; the longer the
mortgage term, the more interest they make. Renovators who only intend to keep
the house for a short amount of time before giving the loan back provide no
significant financial gain for banks, and will have a much harder time negotiating
a mortgage.
Cons
- Interest – The interest charges on private mortgages are typically
higher than those in a traditional bank mortgage. This can be due to a variety
of factors, but will cost you more in additional fees over a long term than
that of a bank mortgage.
- Disregard for credit score – As noted, disregarding a person’s credit score
can be a positive aspect to private mortgages, but it can also be a drawback.
If someone has yet to learn from their poor past financial choices, being lent
a large sum of money for a house they ultimately cannot afford can be a potential
issue. Just because a lender is willing to give out a mortgage loan with
interest does not necessarily mean they trust you can pay it back. Taking out a
private mortgage and being financially irresponsible will worsen someone’s
already bad credit score.
- Fear of Bankruptcy – The worries of bankruptcy are probably not on the mind
of the borrower of the money, but should be considered in regards to the
lender. If the lending company goes bankrupt or closes for any number of
reasons, the mortgage does not simply disappear; rather, it gets sold to
another lending company. This means that instead of dealing with one lending
company you could deal with many, all with different rules and regulations.
Like all large financial decisions, weighing out the pros and cons of private
mortgages is an important choice. When browsing private mortgages in Hamilton,
use this short list of factors to help make the best choice for you.