Rental real estate can be very lucrative, and it’s the kind of passive income that can give you a massive return on investment. And for those who want to invest, turn to mortgage lenders to secure the property. But those who are new to this kind of venture may want to weigh their options first about financing and where to get it. Is it better with banks or private lenders? Here are the pros and cons of these lenders.
Pros Of A Private Mortgage
- Faster Approval
Waiting for loan approval may take time depending on the type of lender, but a private mortgage is known to release cash loans quickly than banks. The latter requires documents and various processes that are tedious and time-consuming. Some application processes take so much time because of the amount of the loan and the paperwork. The application can be approved in just a few hours if you talk to a Certified Mortgage Broker – private mortgage as soon as possible if you have a timeline to keep.
- Chance for Lower Rates
Private mortgage lenders also apply to family members or relatives that you can turn to for money. Specific immediate family members may have the financial capacity to help you. If they trust you enough, you can get a lower interest rate in private institutions. But remember that the rules of the IRS still apply when keeping the rates lower. It must meet the Applicable Federal Rate (AFR), or you can be paying more taxes. Anyone with an ample amount of cash can choose to lend their money and earn more by lending it privately to someone they trust.
- Great Choice for Fixer-Uppers
Private mortgages have shorter payment periods, but those in flipping properties won’t mind the limited timeframe. They may also not dwell on qualifying for traditional lenders because homes that need thorough renovations are frowned upon by lenders even if you have a good credit report.
The reason for this is that it may need more money to fix. Vacant homes are likely to have broken windows, vandalized walls, and plumbing that needs significant work. A private lender may want to take a chance on financing fixer-uppers that you can sell or rent out.
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Cons Of A Private Mortgage
- Short-Term Payment Plans
If you’re looking into taking out a private mortgage loan, you need to plan how you can pay it back. Traditional lenders have longer payment terms. Meanwhile, private lenders can give time to pay back what you owe for up …….
