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Using a Private Mortgage in Real Estate

Private mortgages can be a beneficial option for both borrowers and lenders.


[Updated: Jun 11, 2021 ] Apr 24, 2020 by Liz Brumer

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Party Pros of a Private Mortgage Cons of a Private Mortgage
Borrower

• Less underwriting criteria, making it easier to get a loan. 

• Fewer fees, which means lower closing costs.

• Can be done quickly, which is great for investors who need to close for cash fast.

• Eliminates paying mortgage insurance (PMI).

• May have less favorable terms than a traditional loan.

Lender

• Earn interest on their original loan amount.

• Can charge higher rates.

• Earn cash flow by collecting monthly payments.

• Secured by real property.

• Risk the borrower stops paying.

• Money is tied up until the loan is paid in full or matures.

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