When a private mortgage is the ‘only game in town,’ having an exit strategy is key
Alexander Hu's Takeaway: Private mortgages are often very expensive and risky. In addition to higher interest rates, borrowers are also often required to pay various fees (mortgage broker, lender's legal fees...etc.). For example, borrow $100,000 for one year and the interest rate is 10% ($10,000), plus a broker fee of $12,500 and lender's legal fees of $2,500. Total costs on this one-year loan is $25,000 or 25%. It is not uncommon for total mortgage costs to be over 30% on private mortgages.