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PRivate Mortgages
Private mortgages are a powerful financing solution for homeowners who need flexibility, speed, and options beyond what traditional banks can offer. They are commonly used to consolidate high-interest or time-sensitive debts into one manageable mortgage payment.
With private lending, homeowners can often access up to 80% loan-to-value, depending on the property and overall situation. This equity can be used to pay off property tax arrears, CRA income tax balances, mortgage arrears, credit card debt, lines of credit, and other unsecured or high-interest obligations. The goal is to reduce financial pressure by replacing multiple payments with a single, structured solution.
Unlike conventional lenders, private lenders focus primarily on the value of the property and the equity available, rather than rigid income or credit requirements. This allows for faster approvals and customized terms, making private mortgages an effective option when timing is critical or when traditional financing is not available.
Used properly, private mortgage solutions can stabilize a situation, stop collection activity, protect homeownership, and create a clear path forward — whether that means improving cash flow, catching up on arrears, or transitioning back to traditional financing in the future.
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BRRRR Real estate investing and the power of private mortgage lending
The BRRRR strategy—Buy, Rehab, Rent, Refinance, Repeat—offers a structured approach for real estate investors to build wealth through rental properties. This method involves purchasing undervalued properties, renovating them to increase their value, renting them out for cash flow, and then refinancing to recover the initial investment. Private lending can significantly enhance this process by providing quick access to funds and flexible terms that traditional banks may not offer.
Example Breakdown:
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Property Purchase Price: $150,000
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Down Payment (20%): $30,000
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Private Loan Amount (80%): $120,000
The investor also plans for renovations:
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Renovation Costs: $50,000
After completing the renovations, the new property value is:
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New Property Value: $300,000
Renting:
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Monthly Rent: $2,200
When it’s time to refinance:
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Refinance Amount (80% of new value): $240,000
With the refinance, the investor can:
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Pay off original private loan: $120,000
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Reinvest remaining funds: $120,000 into another property
This example illustrates how using private lending can facilitate the BRRRR strategy, helping investors maximize their cash flow and expand their real estate portfolio effectively.