Private mortgages provide an alternative source of financing for borrowers who may not qualify for traditional bank loans or who require more flexibility in their borrowing arrangements. Private mortgage lenders are typically individual investors, a group of investors, or a private lending company rather than a traditional financial institution like a bank or credit union. Private lenders view mortgages as investments, which often translates to a more lenient approach towards credit checks and background assessments. Securing a private mortgage is often quicker and less complex than qualifying for a traditional mortgage loan. Just keep in mind that those advantages are accompanied by increased interest rates, fees and possibly greater risk.

Opting for a private mortgage could be a viable choice if you are purchasing an unconventional type of property, do not plan on holding onto the property for an extended period, or have an alternative source of income.

The interest rates offered by private mortgage lenders are generally higher compared to those offered by traditional lenders and have shorter terms, usually ranging from six months to three years. This is mainly due to the fact that private mortgage are interest-only payments. In an interest only mortgage setup, none of your payment contributes toward reducing the principal amount owed, unlike in a standard mortgage where the total amount decreases over time.