What is a “private mortgage” and why would I want one?

Updated March 13, 2023.

A “private mortgage” is a loan to purchase property, which is obtained from a source not typically in the business of lending money. Often this will be a relative or the seller. Unless the private mortgage lender is a relative, a lender who is not in the business of lending money is usually not able to provide the borrower with terms that as are attractive as the traditional lenders. However, if a buyer is unable to qualify for a traditional loan (i.e. bad credit, no credit history, insufficient income, etc.) a private mortgage lender may be willing to take the additional risk in exchange for the higher return on the loan. A seller may be willing to do so in order to sell the house, which might not otherwise be possible if a prospective buyer couldn’t get a mortgage.

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