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Guide to Alternative Mortgage Investments

What to Consider When Investing as a Private Mortgage Lender

The benefits of investing in an income property may be clear, but being a landlord doesn’t always make sense. This is where private mortgage investment can be the perfect opportunity. With the guidance from mortgage professionals like the Chris Allard Mortgage Team, you can learn the full details of private mortgages from an investment perspective, explaining the benefits for investors and how a mortgage broker can help facilitate the process. Read on to find out why you should consider a private mortgage investment.

What is a Private Mortgage?

A private mortgage is a type of mortgage loan where the funds are sourced from a moneylender or another financial provider such as a business, rather then a bank.

Private mortgage lending is commonly used in some of the following cases:

  • When a property buyer has inadequate credit to qualify for a traditional bank mortgage
  • When a property buyer is self-employed or has unsteady or non-verifiable income
  • Non-residents
  • Emergency funding for those going through foreclosure,
  • For debt consolidation
  • Obtaining shot-term funds to fund a renovation
  • Finance a house-flip

What Does It Mean to Be a Private Mortgage Lender?

Being a private mortgage lender means that you are lending your own capital to invest in a borrower’s home purchase. Private mortgage lenders have more flexibility to set the terms of their investment to whichever way suits them.

What Are the Benefits of Investing?

Lower Risk of Default

A game of trust might play a part in this, but the likelihood of the buyer going into default on this mortgage is lower than many people think. The buyer’s ability to pay a large down payment  for a private loan, coupled with financial proof such as bank statements, shows some financial security. You may be getting a higher rate of return with less risk than you might have thought.

Benefit from Real Estate Investment Without Being a Landlord

Everybody wants to own real estate and rent it out as a cash-cow, but pesky tenants and constant issues that come with owning property can make it feel less appealing. If you’re the landlord, the weight and responsibility of repairs falls on you. Plumbing issues, broken appliances (and replacing them), and other fixes that properties need become your problem and can eat away at your rental income quickly. A private lender still gets payments each month, but instead of having to part with money for repairs, you can put it all in the bank.

Security of Having Your Investment Attached to a Physical Property 

When you have your investment attached to a physical property, its worth can increase if the location is well-chosen. Also, if a default does take place, you have a higher probability of selling at a profit. Professional and reputable brokers have access to clients who are looking for private lending sources, giving you many opportunities to make a profit from real estate. That’s a worthy investment!

Secure, Effortless Investment 

Private lending represents one of the easiest ways to earn passive income without much effort. Private lenders have a little more flexibility to set the terms to their comfort and convenience. You can manage your terms to profit your principle with interest and move on to the next investment. But at the end of the day, you’ll be able to get your money back and at a higher rate, and you won’t have to worry about any added expenses.

Are There any Risks?

There is always a risk that your investment may default on their mortgage. But as long as your investment has sufficient down payment or equity in their property, private mortgages have a higher chance of running smoothly. A professional can help advise you when it comes to choosing the right person and property to invest in and provide plenty of guidance.

How to Go About Investing in a Private Mortgage

Private lending can provide a stable and secure income if done properly. By seeking guidance from professionals who can advise you throughout the process (and if things go awry), your private mortgage lending investment can often feel incredibly secure and effortless. Always consult with a reputable team of mortgage lenders like the Chris Allard Mortgage Team to help find an investment that is perfect for you while also being low-risk and profitable.

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