Private Mortgages

[maat55]

Has anyone considered refinancing with an private mortgage?

I was wondering if there are people out there with money in banks earning next to nothing that would like to get a better return holding a mortgage.

I'm considering looking for an private investor to refy my mortgage at a rate of around 4.5%(going rate on a 15year).

I would think that a lot of rediculous bank fees could be avoided by this process.

What do you think or know about this possibility?

[LuxLiving]

I don't know about this for refis, but we did buy a house on a private mortgage once. We're good credit risks, so it worked out quite well for them.

[maat55]

I don't know about this for refis, but we did buy a house on a private mortgage once. We're good credit risks, so it worked out quite well for them.

I would think it would be a good investment for someone who wants a better return.

I personally, would want to loan roughly 80% of the value so that if the borrower defaulted, I would have plenty of equity. Since the house usually will go up in value at this point in time, it would be as safe as most investments.

I assume one would go through a title company to setup the mortgage and the borrower and seller can contract any contingencies they see fit.

Do you have any advice from your experience with your private mortgage.

[disneysteve]

How would one go about setting up a private mortgage? What paperwork would need to be done to make it legal and everything?

I'm thinking that this could be a great option for seniors and retirees who have lost money in recent years and seen the interest rates on their savings tumble. My mom, for example, might be interested in taking over our mortgage at 4.5% or 4.75% rather than stash her cash in CDs paying 2%.

[LuxLiving]

We bought a house from the son of a lady who had passed away - she used to go to our church. I believe we made a standard mortgage contract and went to a title closing company to finalize the deal. In today's environment, I would like to think you could insist on having your buyer set up automatically drafted payments. I believe that in my state it's a requirement that you have a legal title opinion written by an attorney, to assure all parties that the seller has a clear title, or if not who all has to sign off on the deal in order to get a clear title.

[snafu]

We bought our 1st home from a widow who was selling to downsize to an apt. We each had a real estate lawyer and completed the legal forms. She was the mortgager and we gave 12 post dated checks ea. year as she requested. It worked out great for both of us. Our benefit was the ability to double up payments without fees and no fee or legal costs on renewals.

Based on that experience we instigated a Family Trust so that we can offer extended family a private mortgage and by pass both agents, and lending institutions.

[maat55]

How would one go about setting up a private mortgage? What paperwork would need to be done to make it legal and everything?

I'm thinking that this could be a great option for seniors and retirees who have lost money in recent years and seen the interest rates on their savings tumble. My mom, for example, might be interested in taking over our mortgage at 4.5% or 4.75% rather than stash her cash in CDs paying 2%.

I would think no different than normal. You just go to a title company and make up a contract with the lender.

The title company would send the funds from the lender to payoff the original note, and put a lien on the title. You would setup an standard contract for foreclosure, establish payments and penalties.

The lender could require insurance on the home, but you could avoid PMI if you have a fair amount of equity.

I would think it would be a win win for both parties.

[maat55]

We bought a house from the son of a lady who had passed away - she used to go to our church. I believe we made a standard mortgage contract and went to a title closing company to finalize the deal. In today's environment, I would like to think you could insist on having your buyer set up automatically drafted payments. I believe that in my state it's a requirement that you have a legal title opinion written by an attorney, to assure all parties that the seller has a clear title, or if not who all has to sign off on the deal in order to get a clear title.

Yes, title insurance should be standard. I don't see why this would not be a good investment for an individual lender and buyer.

[disneysteve]

Very interesting. What costs would be involved? The title company would have to get paid. An attorney drawing up the loan agreement would have to get paid. Any other fees or expenses that would apply here?

[maat55]

Very interesting. What costs would be involved? The title company would have to get paid. An attorney drawing up the loan agreement would have to get paid. Any other fees or expenses that would apply here?

I'm sure the lender will want an appraisel, but the costs would have to be far less than conventional. I'm going to call an local title company and ask this question.

Between you and your mother, you could have any arrangement you wish. I would advise an standard mortgage contract, but that would likely be all you would need.

[LuxLiving]

I suppose it would be nice to get an inspection. If you were working a refi, you'd want to know that what might end up being repo'd was in decent shape. If you were the buyer/refinancee, same as normal, you'd want to know house was in good condition - so maybe that cost could be split and both of you could see it.

On a rural property you might want a surveyor.

And you might want to pull a credit report if you are the lender. And unless it's close family, you'd want the buyer/refinancee to fill out some kind of credit application.

Some filing fees at the court house might be needed.

A free calculator on line could be used to provide you both with an amortization schedule.

Looks to me like all costs could be split if wanted or designated to one or the other of you just like a traditional mortgage.

This was on our house before this one - a long while back, so I'm a bit fuzzy on the major details. I'd look online and google some FSBO websites to see what all's mentioned there.

Here's one that popped up on another SA bloggers page-looks like they've got a FAQ page:
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