Most private mortgages are only for a period of one year, so at the end of that time, the mortgage will need to be repaid in full in most situations.
In many cases, a private mortgage in put into place to relieve some sort of financial pressure or meet a deadline that has come due.
Once the immediate crisis of capital requirement is dealt with from private mortgage funding, the borrower may be inclined to relax a bit now that a certain degree of cash flow stability is back into place.
But you also need to be careful not to become too complacent.
A year can come and go rather quickly and, depending on your private mortgage exit plan, there may be several steps and actions that need to be completed which will all take time.
Once the year is up, unless you have the right to an extension or a renewal of your private mortgage, the funds advanced will need to be repaid and if you don’t have the ability to pay up, you could risk falling into a foreclosure action.
Some borrowers just assume that if they need more time, a private lender will grant it to them, but that can be a dangerous thing to rely on in that the private lender may have another intended use for those funds and may not be able to grant the extension or a renewal.
This is why its important to have a plan of attack for repaying the private mortgage before funds are even advanced.
And in some cases, a good exit strategy will actually improve not only your ability to get funded, but potentially increase the amount of funding you can receive.
But if your private mortgage exit strategy isn’t going to plan, then contact your private lender early on and make him or her aware of your situation so that plans can be made on both sides to avoid a problem at the maturity of the mortgage.
Basically, don’t wait to the last minute and then spring it on the private lender that you need more time to repay the mortgage, assuming they are going to automatically grant you an extension.
The key points here are to have a plan in place that you are working towards, and to manage the time you have available so that you can retire the private mortgage on time without incurring any additional costs.