What a Private Mortgage Really Costs: Rates, Fees, and the Fine Print

When the banks and B lenders can’t help, a private mortgage can be exactly the right tool. But it costs more, and the sticker rate is only part of the story. Here’s the honest, full breakdown of what a private mortgage really costs, so you can decide with your eyes open.

The interest rate

Private rates are higher than bank or B-lender rates because the lender takes on more risk and funds quickly. These are typically short-term, interest-only loans, so your monthly payment covers interest only and the balance stays the same. That keeps payments manageable while the loan does its short-term job.

The lender fee

Most private deals include a lender fee, often in the range of 1% to 3% of the loan, deducted from the funds advanced. This is standard and reflects the cost of arranging private capital. You want to know the exact figure up front.

The broker fee and the professionals

On private files, a broker fee may also apply, and it must always be disclosed to you in writing before you sign. You’ll also pay for legal fees and usually an appraisal. None of this should be a surprise. A good broker puts every cost in front of you in plain numbers.

Questions to ask before you sign

Ask for the all-in cost: rate, lender fee, broker fee, legal, and appraisal, combined. Ask what the exit looks like and when. A private mortgage that solves a problem and has a clear, affordable exit is money well spent. One without a plan is where people get hurt. Insist on the full picture, and it becomes a powerful tool.

Keep reading

When the Bank Says No: Your B and Private Lending Options, RankedUsing a Private Mortgage as a Bridge: The Exit Strategy Back to an A LenderDeclined by Your Bank? Here’s What I’d Do Next