These individuals, or mortgage investors as they can be referred to, can come in the form of one person who is funding a loan and taking back security in the form of a mortgage, or it can be an organized group of mortgage investors that pool their funds or co-fund mortgage requests in some fashion or another.
The focus on private money mortgage financing is what we refer to as equity investing whereby the primary criteria for making a financing decision in favor of an applicant is the amount of equity that will remain in the property once a mortgage is put into place.
The required equity component can vary considerably from property to property and mortgage investor to mortgage investor, but all will have this a focus in their lending decision.
For instance, for most first mortgages provided by private money lenders, the loan to value of charges and registrations on the property, divided by the fair market value of the property will range from 50% to 75%. When private money mortgages are in a second mortgage position, the loan to value ratio will range from 60% to 90% of the market value of the property.
Most private money investors fund deals within a market area they, or their representatives are knowledgeable with, further reducing their risk of loss by being more in tuned with market values and resale time periods.
This type of mortgage financing can also be called hard money lending due to the fact that many private mortgages are placed in situations where the borrowers credit and/or cash flow is in some type of distress and any failure to meet the private money mortgage conditions will likely be met with swift action on the part of the private mortgage lender who will not want the borrower’s situation to deteriorate any further and potentially put the lender’s capital at greater risk.
Most private money mortgage lenders work through an individual private mortgage broker to both source deals from the market and assist with the administration process related to outstanding deals or private mortgages.
In the Toronto an Southern Ontario area, we have a number of relationships with private money lenders and investors that are looking to place funds into private mortgages that meet their lending and funding requirements.
If you are in need of a private money mortgage, or want to know more about how they work, I suggest that you give me a call so I can quickly go over your requirements, answer any questions you may have, and provide private money financing solutions for your immediate consideration.
One of the more common reasons for utilizing a private money lender as a financing resource is because the borrower or borrowing entity has bad or damaged credit that prohibits the borrower from being able to secure residential or commercial mortgage financing from a bank or institutional lender.
Private money lenders are a good fit to provide what we refer to as a bad credit mortgage due to the fact that they are more focused on the equity in the property than anything else.
Put another way, if a private lender can advance mortgage funding where the loan to value on the property is 60% or less after funding, then the 40% equity position provides them with sufficient comfort to fund the deal, even if bad or damaged credit exists.
This is also not to say that a private mortgage lender cannot advance mortgage funding beyond 60% of the property value, but in cases of bad credit, the loan to value ration tends to be lower due to risk and typically falls into the 50% to 65% loan to value range.
There are also varying degrees of bad credit to consider as well which may impact the interest a private lender has in the deal.
For instance, many private lenders will be interested in funding a deal where someone has been recently divorced or lost their job or had some unplanned life event that ended up hurting their credit. They are even going to be ok with a post bankrupt, provided that credit managing practices have improved.
But when you have a very low credit score, and your credit history still shows all sorts of near term late payments, write offs, and judgements, then there will be much few private money lenders that will be interested in the deal, and if they do fund it, the rates are likely going to be higher than for a deal where better or improving credit exists.
So for the wost of credit, private mortgage lenders will still provide equity based loans, but the loan to value available will be lower and the rates higher than if credit was in a better state of repair.
The best way to find private money lenders that place bad credit mortgages is to work through an experienced private mortgage broker who has direct relationships with private lenders that will fund a wide range of bad credit profiles.
If one or more of the above apply to your situation, then a Markham private money loan or private mortgage could very well be your best available solution.
Markham private money lenders make their lending decisions based primarily on the equity in the property.
Similar to conventional lenders, other factors are taken into consideration as well, but the overriding element of their assessment process is the value of the real estate and its potential resale market.
Each private lender can also be somewhat specialized with respect to the types of property mortgages they are prepared to fund.
For instance, one private lender may only finance residential construction projects, while another private mortgage lender may only finance commercially zoned property under $2.0 M in total mortgage value.
There can also be slight differences in the rates and terms charged from one private lender to another.
That being said, the more competitive the deal, and the higher the deal quality from a lending risk point of view, the more competitive the offerings for financing that you’re likely to see.
On the flip side, if you have a property that is not highly marketable and you are in a situation of distress in the first place, then there may be fewer interested private lenders in the deal, which can cause the rates to be higher.
The best way to approach locating and securing a Markham private money loan or private mortgage is to work directly with an experienced mortgage broker who has direct access to private lenders that regularly provide private mortgage financing in the Markham area for the property type and amount you’re in search of.
This will get you talking to more relevant lenders faster, and if time is of the essence in securing a private loan, the aid of a private mortgage broker can be a major key to success.
If you require a Markham private money loan or private mortgage, I suggest that you give me a call so I can quickly assess your situation and outline private mortgage solutions for your immediate consideration.
In recent years, private money lending has been on the rise as it represents a very solid investment vehicle for individuals to place their money and has become a strong alternative to the stock market, especially for those investors that want to keep their funds fairly liquid as well as secured by assets.
Even with the rise of private money lenders in Ontario, it can still be difficult to find one that is a good fit for a particular piece of property you are trying to get financed.
Part of the challenge in locating a suitable private money lender is that each lender or investor is an individual with their own criteria for financing and their own biases and opinions on any given property.
As a result, the same exact piece of real estate can generate considerably different offers from one private money lender to another.
Another challenge to locating and securing private money is finding the appropriate private lenders in the first place.
A private money lender does not typically advertise or have their own direct retail selling arm. In fact, many private money lenders have no interest in even meeting the actual borrowers they provide mortgages to, acting as more pure investors.
Even when you can locate a suitable private money lender that is interested in your financing request, there is no guarantee that the rates and terms offered will be acceptable to you.
The best approach to locate and secure a private money mortgage is to work through an experienced mortgage broker that has a focus on placing private mortgages in the area where you’re real estate is located.
A private mortgage broker as it were focuses on building business relationships with private money investors that want to invest their money in private mortgages.
The broker’s responsibility is to develop a good understanding of the private money lender’s requirements and only bring them deals that they are going to be interested in.
At the same time, the private mortgage broker must also qualify the needs of the applicant or potential borrower so that the needs of the borrower can be matched up with the needs of the lenders.
This is easier said than done and can require a considerable amount of skill and experience to successfully facilitate a private mortgage transaction.
If you’re looking for private money lenders in Ontario, I suggest that you give me a call so I can quickly go over your requirements, and provide private money lending options that meet your needs.