While this can be the case in many situations, there are also institutional bad credit mortgage lenders, most notably trust companies that have a focus on sub prime or uninsured mortgage lending.
The rates provides by both private lenders and institutional lenders with respect to bad credit mortgages can be very similar in a lot of cases.
The big difference between in the two is in the interest term that is offered.
With a private mortgage, most interest terms are only for a period of one year with some exceptions that can include automatic or paid renewals for additional terms.
The institutional sub prime lenders will tend to offer longer interest terms and the longer the term you commit to, the greater the potential for a better rate.
But with interest term, the borrower decision has to be how long they will require a bad credit mortgage.
If the borrower thinks they can repair their credit in less than two years and return to a conventional mortgage product at a better interest rate, then a private mortgage option is likely going to be the better choice. Part of the reason for this is that the sub prime institutional lenders that provide bad credit mortgages typically do not have any type of prepayment option, and if they do, the cost of prepayment can be quite steep.
So if you’re wanting a little bit better rate and know that you’re going to need bad credit mortgage financing for more than two years with very little if any chance of prepayment of the mortgage, then institutional bad credit mortgage lenders are likely going to be the better option.
Because of these particular choices that are available to those with bad credit, its going to be important to think through with one makes the most sense as it can save you considerable costs down the road if you plan correctly.
The best way to get the property bad credit mortgage in place is to work through a private mortgage broker who can quickly assess you situation and provide relevant bad credit mortgage lender options for your immediate consideration.