Private Mortgage – What Is It?

The term mortgage is more familiar to us than a private mortgage. A private mortgage is funds that are lent to you by private businesses, family, acquaintances or friends in order for you to buy a property. The term “private” means that the mortgage issuer is a private funding institution, not associated with a bank. The concept of a private mortgage is probably new to many but it does work. Usually, a mortgage is issued
by a bank or a mortgage lender. A mortgage lender is a licensed company that allows people to borrow money for the purposes of buying a home. Private mortgages offer short-term solutions, usually one to three years. They help borrowers achieve their goals while the mortgage lender gets some interest. Private mortgages are used during the following cases;

  • When the borrower does not have enough credits to get a bank loan
  • For the countries non-residents.
  • For mortgagors who want a second mortgage.
  • The self-employed people who have varying incomes.

A private mortgage has its own share of risks. The mortgagor may develop complicated issues later in life and be unable to complete the loan payments or he/she may just have malicious intentions of not paying the loan back. That is why mortgage lenders should put a lot of factors into consideration before loaning out their money. They should know the financial situation of the borrower, the loan payment
history and consider their personal relationship with the borrower.

A Private Mortgage Agreement Strategy

This brings about the idea of a private mortgage agreement plan. Even though the issuer is not licensed, the mortgage plan needs to be documented properly to protect both parties. The agreement of the loan should include the expectations of both the borrower and the lender. It should state; the deadline for the loan payment, what measures should be taken if the lender does not receive the payment on the agreed date, the loan security, and loan insurance if any. Securing the loan usually gives an upper-hand to the mortgage lenders by allowing them to get back their capital in case the borrower dies or is unable to pay the loan.

Documentation Needed by Private Mortgage Lenders

Some private mortgage lenders may require certain information from borrowers before giving out a private mortgage. Some of the documentation includes;

  • A letter from a credit bureau explaining if you have any credit issues.
  • Bank statements for past three consecutive months
  • A promise in writing of your debt payment plan, note payable.
  • Those who are self-employed are required to provide their signed personal tax returns.
  • Copies of any current investments.


A privately funded mortgage is an alternate way to purchase or refinance a home or investment for yourself. For a private mortgage to work, there are some steps to be followed. At Basic Finance, we think outside the box when it comes to private mortgages, no matter your situation. Basic Finance Pty Ltd is a privately funded lender which has operated since 2001 in Melbourne. We are an affiliate of vast numbers of private investors and lenders (100+ members) and providing our lending services to brokers and clients across Australia. We consider all types of non-conforming business finance.

If you are considering your finance options and believe the banks will refuse you, get in contact with us today!