The three exits
Almost every private mortgage ends one of three ways: you refinance with a bank or alternative lender once the original problem is fixed, you sell the property, or you consolidate the private loan into a renewed first mortgage. Knowing which exit you are on changes how the whole arrangement should be structured.
Build the credit file during the term
If bruised credit forced the private loan, the term is your repair window. Every payment made on time, every credit card balance kept low, every collection settled moves your score. Twelve months of clean history can be the difference between another private renewal and a bank approval.
- Make every payment on or before the due date
- Keep revolving balances under thirty percent of limits
- Dispute and clean up old report errors early
Document income from day one
If income was the problem, structure it so a bank can read it: file taxes on time, keep business and personal accounts separate, deposit income consistently. Self-employed borrowers who spend the private term organizing their paperwork exit dramatically easier than those who spend it hoping.
Watch the calendar, not just the rate
Private terms are short, usually one to two years, and renewal is not guaranteed or may come with new fees. Start the exit process four to six months before maturity. A file that needs a few more months of seasoning is a normal conversation at month eight and a crisis at month twelve.
If the exit is not working
Say so early. A broker can often arrange a renewal with the existing private lender, a new private lender at better pricing as equity grows, or a staged move through an alternative lender. The worst version is silence until the demand letter arrives. The second worst is pretending the problem will solve itself.
Frequently asked questions
- How long should a private mortgage last?
- Ideally one to two years. Longer than three years of consecutive private borrowing usually signals the underlying plan needs to change, including considering a sale.
- What credit score do I need to exit to a bank?
- It varies by lender, but many alternative lenders work in the low six hundreds and banks prefer higher. Clean recent history often matters as much as the number itself.
- Can I pay off a private mortgage early?
- Often yes. Many are open or carry small penalties after an initial closed period. Check the discharge terms before signing.