15720 Brixham Hill Ave Ste 300 Charlotte, NC 28277 | Phone: 704-SELL-2-US

Being a Responsible Private Mortgage Lender

Private mortgage lending is an excellent way to improve returns on your savings and retirement funds. Bank savings and certificate of deposit rates are simply not worth the effort and stock market volatility makes it impossible to consistently gauge your returns. Also, consider that there is no tangible asset attached to the investment and losses are a real possibility. Real estate, as an asset, provides protection, is in most cases appreciating and can provide protection other methods of increasing your income and wealth simply cannot.

While a valuable strategy to add to your portfolio, there are risks and much to consider when becoming a private mortgage lender. Here is valuable information that will help you decide if this strategy is right for you and how to get started.

Private Mortgage Agreements

All private loans should be well documented. Each party’s expectations should be clearly defined, in writing. The terms should be clear and agreed upon so that there are no misconceptions. Each party should have the documents reviewed by their own independent council prior to commencement.

Items to be clear about and review:

  • Terms.
  • Security- review of property used as collateral.
  • Payment dates, especially when first payment is due.
  • Where payments are made and acceptable payment type.
  • Pre-payment penalties.
  • Late payments and fees.
  • Missed payments.
  • Definition of default.
  • Repercussions for default.

Loan Security

Your interest as a lender should always be protected. As a private mortgage lender, you have the security of real property. You have the ability to recoup your loan proceeds by taking back the property, possibly through foreclosure, unless prior arrangements for default have been made.

It is necessary to research the difference between lending to home owners who will occupy the home as a primary residence and investors. Owners who occupy the property have far more rights and requirements on the lender if the need arises to take back the property. Additional notices and legal regulations dealing with owner occupied loans make lending to investors much more attractive when realizing your goal of earning income from your lending.

 Things to Consider When Private Lending

Tax impact on your overall income

Legal review of all documentation and agreements

Your financial security if the loan is not repaid on time

Use of income; cash flow, retirement funds or tax planning

More Information

If you would like to become a Private Mortgage Lender, have additional questions or would like to review our Prospectus, please visit our Funding Partners page at www.rosspittman.com