Private mortgages are often short-term solutions. The total cost can include interest, lender fees, brokerage fees, legal work, appraisal, administration, discharge costs and sometimes an interest reserve.
Look beyond the interest rate
Private mortgages are often short-term solutions. The total cost can include interest, lender fees, brokerage fees, legal work, appraisal, administration, discharge costs and sometimes an interest reserve.
The clearest comparison shows the gross mortgage, net cash received, monthly payment, total cost during the term and principal still due at maturity.
Why the exit plan matters
A lower monthly interest-only payment does not reduce principal. Before committing, identify the realistic next step: sale of the property, completion of renovations, improved income or credit, or refinancing to a bank or alternative lender.
- Set a target date to begin refinancing
- Estimate the income and property value needed to exit
- Understand extension and renewal costs
- Stress-test the plan if the property takes longer to sell
When it may not fit
A private mortgage may not be suitable when there is no feasible repayment path, when fees consume too much of the requested advance, or when converting unsecured debt into debt secured by a home creates unacceptable risk. A complete review should consider alternatives and material risks.