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 with money to invest.

Example of private mortgages

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

Mr. Seller then found a buyer, Mr. Buyer. He then wrote a purchase and sale agreement for the property between himself and Mr. Buyer. To finance the deal, Mr. Seller created a real estate lien note, aka a private mortgage.

What are in the terms of a private mortgage?

A private mortgage usually states:

• 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.

How to make a private mortgage legal?

The private mortgage contract is filed at the courthouse to make it legally enforceable.

Benefits of issuing 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.