Mortgage Refinance With Private Money
“Mortgage Refinance With
Private Money From A
Private Mortgage Lender”
A mortgage refinance on either an existing residential or commercial mortgage from a private mortgage lending is a very common approach for a number of different mortgage financing scenarios.
Because private mortgages are more equity based than a bank or institutional mortgage, they have a fit where some combination of cash flow, credit, or time to complete is an issue with your mortgage refinancing requirements.
And while a private mortgage is likely going to be more expensive than a mortgage refinance action through a bank or institutional lender, the ability to just get financing in place can still result in a significant reduction in financing costs and cash flow requirements.
Let’s go through some of the more obvious applications of a private mortgage for a mortgage refinance requirement.
The most common situation is that funds are required for debt consolidation whereby additional financing needs to be pulled out of the equity in the home or commercial property, but there isn’t sufficient credit, cash flow or time to get this approved through a bank or institutional lender. An equity based mortgage through a private money lender can repay the existing mortgage with a new mortgage and provide additional capital as long as there is enough equity in the property to support a larger borrowing amount.
Another very common form of mortgage refinance through a private lender is when you are in current default on the existing mortgage and the lender is taking action to realize on their security, or you have reached the time for mortgage term renewal and your bank (as well as other institutional lenders) are not prepared to either renew your mortgage or offer you a new mortgage to pay out the existing first.
In these cases, a private mortgage can be the most obvious step to pay out the existing mortgage and save the property from foreclosure which would likely erode or destroy the equity in the property.
As mentioned earlier, even at slightly higher interest rates than a bank or institutional lender, a private mortgage can significantly reduce your average cost of capital if the new mortgage will be consolidating credit cards carrying interest rates in the high teens or beyond. And because most private mortgages require interest only payments, the cash flow impact on your budget can be similar or even lower than a fully amortized institutional mortgage.
If you’re in a situation where a mortgage refinance is required and some combination of cash flow, credit, and time will not allow you to get a new conventional mortgage from a bank or institutional lender, then a private mortgage could very well be your best available option.