How does a Private Mortgage work?

A private mortgage is different from other types of mortgages because a private mortgage is issued by an individual instead of the usual bank and financial institution. Private mortgage notes lenders or private mortgage notes issuers are individuals.

Example of private mortgages

For example, Mr. Real Estate seller wanted to sell a real estate property and decided to hold the mortgage himself. This mortgage that Mr. Real Estate seller held personally became a private mortgage.

Mr. Real Estate seller then found a real estate buyer, Mr. Real Estate buyer. Mr. Real Estate seller then wrote a purchase and sale agreement between himself and Mr. Real Estate buyer. Mr. Real Estate seller also created a real estate lien note, a private mortgage.

The private mortgage stated:

• the total purchase
• the down payment
• the total amount financed by the mortgage
• the interest rate
• what the payments are
• what happens if the real estate buyer defaults on the note.

This private mortgage is then filed at the courthouse to make it enforceable.

Why do private mortgage notes lenders issue private mortgages?

There are many reasons why someone would want to become a private mortgage notes lender. One reason is so that the real estate property he or she is trying to sell will sell easier.