November 22, 2018 Kristen Godel

Difference Between Private Mortgage Lenders and Banks

When it comes to mortgage needs, its true, most home owners visit their local bank. It seems convenient to do so since most of your financial holdings and accounts are typically with a specific bank. Most often, those that seek solutions outside of their bank, tend to do so when they face difficulty in obtaining the loan that they are after. When this happens, people tend to learn about alternative lenders such as <a href=”/the-difference-between-private-mortgage-lenders-and-banks/”>private mortgage lenders</a>.

Unlike banks, private mortgage lenders are not restricted to approving a loan based on strict guidelines such as exceptional credit and income thresholds. This is mainly due to the fact that banks are regulated, and private mortgage lenders are not. It is important to note that although this is the case, mortgages offered by both types of lenders are equally legal. Another reason why the banks are as strict as they are is due to their conservative approach to assessing risk and optimizing their profits. Banks have the art of making profits down to a science. Private mortgage lenders on the other hand, approach the application with equity as the main qualifier. If there is sufficient equity to collateralize the mortgage against, the private mortgage lenders will almost always approve the request. This is due to the fact that, at this point, their money is considered reasonably safe. Private mortgage lenders do want the borrowers to be able to make their monthly payments and will still assess other factors, but this typical assessment has more to do with the interest rate offer, rather than the approval itself.

Another <a href=”/the-difference-between-private-mortgage-lenders-and-banks/”>difference between the banks and private mortgage lenders</a>, is the length of the term that each mortgage is taken. Since mortgage rates are the lowest through banks, it would be wise to consider taking long term mortgages. However, due to the nature of the solutions offered by private mortgage lenders, it would be wise to keep them on a shorter-term length.

If you are interested in learning mortgage about private mortgage lenders or any other type of mortgage solution, please feel free to give is a call today to discuss your needs – 905.455.5005