There are different contingencies that you should know about in case you want to engage in a private mortgage. As its name suggests, a private mortgage is provided by a private lender to another person. This private lender is not a bank, mortgage company, or financial institution. It’s more like a company that has the funds to provide you a mortgage on your home. Private mortgages are usually offered in the form of a second mortgage on a home.
Before you commit yourself to private mortgage, it is important that you discuss all the possible contingencies with your lender. Technically, all things that could make the lending agreement complicated should be discussed. Here are some of the questions that you need an answer before you even sign a private mortgage:
- What happens if you miss a payment?
It’s not unlikely for a borrower to miss a payment or two in the entire length of the loan. And since that’s bound to happen, what will be the implications of that. What if the borrower gets involved in deep financial trouble? What would be the lender’s way of protecting itself?
- Is loan restructuring an option?
In case of default, mortgage lenders offer a restructuring plan for the borrowers so that they can regain traction on their loans and prevent the foreclosure of the property. But since this is a private mortgage, is your borrower amenable to this?
- Is everything included inthe mortgage deed fair to both parties?
Don’t agree to a mortgage agreement that favors the lender more than the borrower. If anything, the best interests of both parties should be protected. This is why it’s important that you inspect all the legal documents first before doing anything else.
Why Discussing Contingencies is Necessary
It’s important that both parties plan for contingencies when getting into a mortgage agreement. This is what most private lenders Ontario do so it’s also what you must do, especially in the case where the private lender is not a business entity but another individual.
You may want to consult either an attorney or a tax preparer for cases like this. There are also a handful of private institutions that offer their services to assist both parties of a private mortgage so each can get the best of the loan agreement.
Why You Should Always Keep Things Formal
Keep in mind that you’re engaging in a business relationship with the other party and it is only right to get things down into writing. The legal document becomes your basis for everything, especially in unforeseen instances. A mediator will easily help you find a solution to any problem if there’s a document that he can refer to.
Don’t underestimate the power of a legal document because it can redeem you out of an otherwise nasty situation. Mortgages can sometimes be painful so it’s important to set everything straight beforehand when both parties are in the right mindset and in a sound condition. Find yourself a reputable and trustworthy private lender today.