Bad Credit Mortgages – Private Mortgages

Bad things happen to good people. Sometimes people run into problems such as the loss of a job or a divorce, which can lead to the accumulation of debt, resulting in financial problems and bad credit. So what happens when things turn around and you want to borrow against your home but your past bad credit continues to haunt you?

Bad credit mortgages are available and the main determining factor is not your credit but rather the amount of equity you have in your home. Bad credit mortgages, also known as private mortgages, are often financed by private individuals.

Private mortgages are almost always interest only. Also, they are usually second mortgages that bear interest rates from 10%-15%. Most private mortgages are negotiated on 1 year terms and bear large annual renewal fees.

Be prepared to pay for an appraisal up front. You will also be required to pay a lender fee, a broker fee, a legal fee and sometimes an admin fee out of the mortgage proceeds.

Sometimes people get declined by their bank for a second mortgage so they get a private second mortgage instead when their credit really isn’t that bad. This is due to the assumption that it is really bad just because the bank said no.

If you are thinking about looking for private mortgages or bad credit mortgages, check your Equifax and TransUnion credit reports first. Also, consider speaking with a mortgage broker. There are a range of lenders in between the banks and private lenders that include: trust companies, credit unions, finance companies and mortgage investment corporations. With good equity, some of these financial institutions will offer bad credit mortgages at more competitive rates and terms than private mortgage lenders.