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There are some things in life that always seem to go together. Fish and chips, Batman and Robin, meat pie and sauce, and mortgages and banks. It is a common misconception that going to a bank or financial institution is the only way to get a mortgage.

In fact, there are other, equally regulated mortgage solutions, the most common of which is private lending. Private lending is in fact older than the financial institution model we know today.

Private lending is also known as private mortgages or solicitor funding because it was previously common for solicitors to manage investment funds, connecting lenders and borrowers. This was before ASIC stepped in as the industry regulator for private lending, including mortgages. Now this type of lending falls under the National Consumer Credit Protection Act 2009.

What Is A Private Mortgage?

Private mortgages are a way for home buyers to borrow the funds they need without going through a bank. The funds are provided by an individual like a friend or family member, private business, trust or another lender.

Provided the lender meets ASIC’s regulation requirements for credit activity, the practice is completely above board and regulated as a normal mortgage would be. However, vendor’s mortgages – loans obtained by banks – are regulated by APRA, the Australian Prudential Regulation Authority.

Private mortgages can be a win-win for buyer and lender, provided they are executed correctly.

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