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Beware Of Lousy Mortgage Options Dressed Up As Good Ideas

If you're in the market for a mortgage, you're probably aware that there are many options available. While some of these options may seem attractive at first, it's important to be cautious and do your research to ensure that you're not being sold a lousy mortgage dressed up as a good idea.

One of my favourite people on Twitter to follow is Ron Butler, Founder of Butler Mortgage. He has a certain way of looking at the Real Estate and Lending Industry with a cautiously optimistic look and is not afraid to shine a light on something when it just doesn't smell right. Ron has a wealth of knowledge and you should follow him too! Now back to the article in which Ron provided some great insight.

One product that some mortgage brokers are peddling as a solution to soaring payments on variable rate mortgages is a private mortgage to act as a "payment fund." But is this really a good idea? Let's take a closer look.

The Problems With Private Mortgages

Private mortgages may seem like a good option at first glance, but they come with a number of significant downsides. For starters, they are often very expensive, with interest rates ranging from 10% to 16% and fees as high as 6%. This can add up quickly and make the cost of the mortgage much higher than what you would pay with a traditional mortgage.

But the problems with private mortgages don't end there. Some mortgage brokers offer a product called "pick a payment" or "no payment" mortgages. These are effectively reverse mortgages, where the mortgage balance grows every month. This can be a disaster for homeowners, as it can lead to a situation where the homeowner owes more on their mortgage than their home is worth.

Why Homeowners Should Avoid Private Mortgages

There are many reasons why homeowners should avoid private mortgages. Firstly, they are almost always more expensive than traditional mortgages. Additionally, many private mortgage lenders are unscrupulous and may engage in predatory lending practices. This can lead to a situation where the homeowner is unable to keep up with their mortgage payments and ends up losing their home.

Furthermore, many homeowners who are considering private mortgages are doing so out of desperation or fear. They may be struggling to keep up with their mortgage payments and are looking for a way out. Unfortunately, private mortgages are often marketed as a quick fix, when in reality they can make the situation much worse.

What Homeowners Should Do Instead

If you're struggling to keep up with your mortgage payments, it's important to explore all of your options. One option that may be available to you is to research extended amortization options through your bank. This can help to reduce your monthly mortgage payments and make it easier for you to keep up with your payments.

Another option to consider is refinancing your mortgage. Refinancing can help you to secure a lower interest rate and reduce your monthly mortgage payments. However, it's important to do your research and ensure that you're getting a good deal before committing to a new mortgage.


In conclusion, it's important for homeowners to be cautious when considering mortgage options. Private mortgages may seem like a good idea at first, but they are often expensive and come with many downsides. Homeowners who are struggling to keep up with their mortgage payments should explore all of their options, including extended amortization and refinancing. By doing your research and making an informed decision, you can avoid falling victim to lousy mortgage options dressed up as good ideas.


Q: What is a private mortgage?

A: A private mortgage is a mortgage that is not offered by a traditional lender, such as a bank or credit union. Instead, it is offered by an individual or a private lending company.

Q: What are the downsides of private mortgages?

A: Private mortgages are often more expensive than traditional mortgages and may come with high fees and interest rates. Additionally, private mortgage lenders can engage in predatory lending practices. There are some pros and cons for both the lender and the borrower.

Q: What is a pick-a-payment or no-payment mortgage?

A: A pick-a-payment or no-payment mortgage is a type of private mortgage where the mortgage balance grows every month. This can lead to a large balloon payment that the borrower is not prepared for.

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