Private mortgage loans are an increasingly popular alternative to traditional bank loans. With faster approval times, lower interest rates, and more lenient terms, they may be a great option for borrowers experiencing financial distress or those with non-traditional forms of income who may not have W-2s.
But are private mortgage loans right for you? And what are the benefits of a private mortgage loan? We’ll tell you everything you need to know here.
Private Mortgage Vs. Traditional Mortgages
The biggest difference between private and traditional mortgages is that individuals or private companies issue private mortgages, whereas banks or other financial institutions fund traditional mortgages.
More specifically, private mortgage lenders aren't bound by the same regulations as traditional lenders since they aren't locked into the same rules set by government regulators. Because of this, private mortgage lenders have more freedom to set their lending standards. They often do so by looking at a borrower's character, reputation, and experience rather than just their credit score and financial history.
Benefits of Private Mortgage Loans
There are several benefits to private mortgage loans, including:
- More Flexible Lending Criteria
As we said above, private lenders offer more flexible lending criteria. So if you are a borrower with a low credit score or non-traditional income sources who doesn't qualify for a traditional loan, you still may be able to secure a loan with a private lender.
- Lower Interest Rates—Sometimes
Private lenders often have less overhead costs than traditional lenders, allowing them to pass additional savings on to borrowers in the form of lower interest rates. This especially applies to those with strong credit, low debt-to-income ratios, and an overall low-risk profile.
- Faster Approval
Because private lenders set their own lending criteria, they often work more quickly, approving mortgage loans much faster than traditional lenders.
- More Personalized Experience
Private lenders are typically individuals or smaller institutions. Because of this, borrowers generally receive a much more personalized experience unique to their personal and financial needs.
- Increased Flexibility
Unlike traditional lenders, private lenders also offer more flexible loan terms. These may include variable interest rates, interest-only payments, and shorter loan terms. That means borrowers can custom-tailor their loans to fit their specific needs.
Keep in mind; however, that private mortgage lending is generally considered riskier, and as a result, there are fewer private lenders in the market. Additionally, private lenders may be more selective in their loan approvals and may choose only to fund those loans that meet their specific lending criteria.
Let Us Find the Right Loan for You
Need help finding a loan that fits your personal and financial needs? Nikkael Home Loans has 60 years of combined experience in mortgage law, loan origination, and home protection. We can help you find the right solution based on your needs. To learn more about your loan options, request rates online today to get started.