Private mortgages are expensive and are only something I will enter a client into if we have a very clear exit strategy and the benefits outweigh the risks. Typically a private mortgage will carry a 1-2% fee and be at a high interest rate.
So what the 3 situations where we typically use private lending?
My top reason is to use private lender for deposit money. Say you have your home listed for sale and then while you are waiting for a buyer you stumble upon the house of your dreams. You want to buy the house but all your money is tied up in the home that is for sale. A private lender is a great option to get you deposit money until your home sells and you can access your funds.
The second scenario I like to use private lending for is in order to bridge funds from a home that lenders cannot bridge from. Conventional lenders do not bridge a mortgage from a home that is not firmly sold yet (even if it is listed for sale) or from a matrimonial home to one half of the couple during a separation/divorce.
The third situation is for a client who is having a hard time paying their bills and their credit is suffering. Say a client is 6 months from the renewal of their mortgage on their home and their credit score and profile is too low to qualify at their maturity date. We can take all their unsecured debt and bundle it into a private mortgage essentially paying it all off on the bureau. Clearing up the clients credit issues in this manner definitely sees and increase in credit score which can then have them successfully qualifying for their mortgage at renewal.
What you will notice about all these scenarios is that they are short term and there are exit strategies for each one. Using private lending has to make sense for the client and in these three scenarios it often does. We have private lenders that can provide us with funds within 24 hours should you fit into the above scenarios or something else that could use their funds wisely.