Managing Private Mortgage Risk

“One Of The Primary Ways To Manage Private Mortgage Lending Risk Is Through The Broker Risk Assessment”

If you’re a private lender, or an investor that is thinking about investing in private mortgages, one of your number one concerns is going to be understanding and managing the related risk of your investment.

This is going to be the case regardless of what type of investment vehicle you’re looking at, but when it comes to private mortgage lending, what’s the best way to understand and manage risk?

For the private mortgage lenders I work with, one of the things they really rely on is the risk assessment I provide to them.

The primary goals of my risk assessment process is to determine the strength of the security being offered as well as the borrowers ability to pay.

Of these two, the first part, security assessment, is always the most important as it relates directly with the ability of a private mortgage investor to conserve their capital over time.

This is important due to the fact that regardless of how hard we try to avoid default or foreclosure situations, they can and do happen and when they do, we have to be in a position to get all the capital back through the foreclosure process.

One of the more typical examples of an unforeseen mortgage repayment problem is when a husband and wife enter into a divorce proceeding. When the mortgage was initially issued, there was sufficient cash flow to service payments and equity in the property to cover the risk of loss. But during a divorce, sometimes neither side ends up making the payments and the mortgage falls into arrears which will not get made up until a foreclosure action is taken.

Regardless of the reason for mortgage arrears or default, the strength of the mortgage investment comes back to the risk assessment done before funds were advances, that made sure their was sufficient security and liquidity to get capital repaid and conserved.

The initial risk assessment typically focuses in on the liquidity of the market and the resulting loan to value that would relate to that liquidity.

For instance, larger urban centers will always have higher liquidity than smaller centers, so its always important to make sure that the amount of equity in the property relates to the potential resale-ability of a given property, or its liquidity.

In the event of default and potential foreclosure, an experienced mortgage broker will many times manage or coordinate the repayment process for the lender.

This reduces the lender or investors concern about the process, allowing them to rely on the mortgage risk assessment to make their lending decision.

When there is a repayment problem, its going to take some time to get capital back in the hands of the lender which will cause some inconvenience.

But in the end, capital is conserved through full debt and return repayment that results from that initial assessment being properly done in the first place.

Our goal with our investors to make sure that the initial mortgage assessment not only outlines the borrower and market risks, but also considers the lending criteria and risk preference of the investor. In this way, regardless of what occurs with loan repayment, we are always on solid ground to be able to conserve investor capital.

Prepayment Privileges On Private Mortgages

“Prepayment Privileges Can Vary Considerably From One Private Lender To The Next”

While there is a fair bit of standardization among bank and institutional lenders when it comes to prepayment privileges of mortgage principle prior to the end of the mortgage term, this is not the case with private lenders.

Banks and institutional lenders have fairly common prepayment terms due largely to competitive factors.

But private lenders tend to set up their prepayment to suit their own investment requirements.

You can have very similar private mortgage options in terms of rate and fees with very different prepayment options available to you.

Private money loans can be fully open at any time, fully open after a certain number of months, fully closed for the duration of the mortgage term, open to three months interest penalty, and so on.

And while there can be this broad variability, there can also be considerable flexibility as well.

For instance, its very uncommon to see a bank or institutional lender bend on their prepayment policy. But a private investor makes their own decisions and many are open to negotiate prepayment so that it suits both lender and borrower.

And when you’re comparing two private deals, the prepayment penalty can be the deal breaker ahead of rate if you’re pretty sure that you will be retiring the loan during the mortgage term, or at least have the ability to pay it down.

There is also a fine line here to remember with respect to negotiating.

Basically some privates will be flexible on this point and some will not. In fact, an individual lender may even vary on their flexibility from deal to deal.

This could be related to their confidence level in the deal, their urgency in getting deals closed and getting their money out into the market, their plans for the funds in the near future, and so on.

The key here is not to assume that a deal offered to you will be flexible on the stated prepayment privileges.

It certainly doesn’t hurt to ask.

Just make sure that you don’t lose out on an a solid private mortgage offering due to a prepayment privilege that is slightly outside of your preference.

With private lending, many times the offer you have in hand is the best offer you’re going to get in the time you have to work with so its important to balance off trying to get the best deal with running out of time and incurring an even greater cost.

If you have a certain prepayment requirement that is important to any private mortgage decision you intend to make, then it makes a great deal of sense to be working with a mortgage agent or broker that can access the repayment terms you desire.

Private mortgage brokers work with a number of different investors and lenders and they understand the prepayment options available from each.

By working through a broker, you can find out right away if he or she has the options you are after and if, in their opinion, your desired rate, term, and prepayment rights are readily available in the market.

Especially in situations where time is of the essence, you need to be applying to private lenders that are most relevant to your requirements and this is where a private mortgage broker can add a lot of value.

Good Private Lenders Move Quickly

“If You Get A Private Mortgage Commitment From A Good Private Lending Source, Make Sure You Decide Quickly On Whether To Take It Or Not”

There are all sorts of private lenders in the market place, but they certainly are not all the same.

A good private lender knows what they’re interested in, assesses an opportunity quickly, and moves to fund and close as quickly as possible.

Why?

Because when good privates have money available to lend, they want to get it out into the market as quickly as possible due to the fact that they aren’t earning much more than bank interest when they are in a cash position.

They’re goal is to get available cash placed quickly and continue making their targeted level of return.

This also means that they are also in and out of the market based on money availability to lend.

So when they make you an offer, you’d better consider it quickly as it won’t stay on the table long if another opportunity presents itself while the private lender is waiting to hear back from you.

For the better deals, there is also competition among lenders, so they also want to move quickly to complete the deal and avoid or minimize the possibility that they could lose the deal to someone else.

Contrast this with less experienced private lenders, who may have money available to lend most of the time, but are more conservative in assessing deals and providing commitments.

Solid sources of private mortgage financing will assess a deal quickly and decide quickly if its something they are interested in or not. If they’re not interested, you typically know right away, sometimes within the same day that they receive a financing package.

When a term sheet, letter of interest, or commitment is issued, its usually only going to be good for five to seven days.

After that, the lender/investor may very well move on to another deal and remove their interest in your application all together.

This is not to say that if you circled back to any private lender weeks or months after an initial commitment was provided to you that they still wouldn’t be interested in the deal.

The challenge is will they have available money when you come back to see them sufficient to meet your requirements?

The Apples And Oranges Of Mortgage Lending

This of course is the complete opposite of anything you have experienced with a bank or institutional mortgage lender.

In most cases, even if your offer to finance lapses, you can go back any time and start all over again with them without there being any concern that they all of a sudden couldn’t or wouldn’t do the deal.

But taking a bank type approach with a private lender can see you end up losing out on an acceptable mortgage offering.

So make sure that if you’re after private money that you’re ready to decide quickly when an option is presented.

One of the best ways to be prepared for this is to establish and acceptable range of rates and terms and if a deal is presented that fits the range, you likely should seriously consider it and do it quickly while it remains valid.

There is never a guarantee that a better deal or comparable deal will surface in the time you have to work with so its good to be prepared to make a quick decision.

private commercial mortgage lenders ontario

“We Represent Private Commercial Mortgage Lenders In Ontario”

Private commercial mortgage lenders in Ontario can come in a wide variety of different shapes, sizes, and interest levels.

While most private lenders in the market are individuals, when it comes to private commercial mortgages, only a small percentage of the individual lenders will put their money into commercial property.

And for those that are interested in commercial property mortgage investing, the majority of private commercial mortgage lenders in Ontario will be interested in deals under $2,000,000.

That being said, for larger deals, there is still private money available in the market for Ontario private commercial mortgage deals…its just that the actual potential lending group will be much smaller than for other private money financing requirements.

But even with the smaller commercial property financing requirements, being able to match up a private lender to a commercial mortgage request can still be a hit and miss proposition due to the fact that there are so many different types of commercial property out there, each with their own unique borrower back story to lend against.

The key to success is getting in contact with the right private commercial lender as early on in the process so there is no time wasted going from one lender to another in very much a hit or miss type fashion.

Just because private mortgage lenders tend to move faster than banks or other institutional lenders, you still don’t want to waste your time talking to individuals or groups who either aren’t going to be able to help you or have a very low probability of being able to move forward and approve and fund a deal.

Getting access to private commercial mortgage lenders in Ontario that can fund the request you have, and achieving a strong lender match in terms of what you want and what a particular private commercial mortgage lender can provide, are going to be the keys to private commercial property financing.

The best way to improve your probability of locating and securing the private commercial mortgage you’re looking for, as well as getting rates and terms that you are prepared to access, is to work with an experienced private mortgage broker who has both private commercial mortgage lender connections in Ontario as well as a track record for successfully placing deals.

If you’re trying to locate suitable Ontario private commercial mortgage lenders for your business or investment property, then I recommend that you give me a call so we can go through your requirements together and discuss potential lender options that can meet your requirements.

Click Here To Speak Directly To Toronto Private Mortgage Broker Joe Walsh For Assistance Locating Suitable Ontario Private Commercial Mortgage Lenders

Dealing With Private Mortgage Lenders

“Dealing With Private Mortgage Lenders Can Be Considerably Different Than Dealing With A Bank”

Private mortgage lenders are for the most part individual investors that place all or some of their investment dollars into private mortgages.

While there can be some parallels that can be drawn towards private lenders as a whole, each is still a unique lending source with their own lending and funding criteria and methods of operating.

Conventional banks tend to be very similar in the manner in which they operate as the major they deal in is highly competitive and very much a commodity in nature. Straying too far outside of the box for a bank or institutional lender can risk market share so everyone pays very close attention to what everyone else is doing.

With private mortgage lenders, there is still a competitive factor involved, but the nature of private lending is to provide more of a customized solution where the mortgage commitment can vary from one lender to another and one deal to another.

This higher level of variability is not well understood by borrowers at large and as a result there can be times when someone looking to secure private money may not end up with the most competitive deal readily available to them.

The best way to counter act this reality and have it work in your favor is to work with an experienced private mortgage broker who is going to be able to guide and advise you as to what types of terms and conditions are more representative of what we might call standard market offerings.

The role of any private mortgage broker is to basically represent both the borrower and the lender, so there is an expectation that both sides interests will be well served and a good lending match will be made.

This is not always going to be the case when you try to locate and secure private mortgage financing on your own or if you end up working with an inexperienced mortgage broker that is developing their private mortgage financing knowledge.

The private mortgage broker is also many times the administrative go between from borrower to lender so if there are any issues with your private mortgage the broker is also there to assist in any way he or she can.

To find out how to more effectively deal with private mortgage lenders, I suggest you give me a call and I will get all your questions answered right away.

Click Here To Speak Directly To Toronto Private Mortgage Broker Joe Walsh

Private Mortgage Lender Variety

“There Can Be Considerable Differences Among
Private Mortgage Lenders”

Private mortgage lenders tend to come in a variety of different shapes and sizes.

Contrary to the popular belief of many, there is no standardization among private lenders and not all private money is “really expensive”.

Private lenders, like any type of financial lender, have their own rate targets and in order to achieve those targets, they need to be realistic about the types of properties they are prepared to invest in, and the amount of leverage they are going to be comfortable with.

For instance, if a private lender wants to consistently earn an annualized return on their funds of 15%, they are going to have to be focused on higher risk opportunities. Sometimes, due to timing, high cost private lenders can still command higher rates in situations where the borrower does not have time to seek an alternative. But for the most part, this is not going to be the case, and lower rate deals will be able to attract lower rate private mortgage fees.

Some people will be surprised that private money can be secured in the 5% to 7% range for lower risk, lower leverage property.

But lower risk, and lower leverage is the key. Individuals with higher risk financing requests are not likely going to be able to attract mid single figure rates no matter how hard they try or how long they look.

In terms of rates, lender fees, and mortgage terms, there can be considerable differences among private mortgage lenders, creating real value for those that work at trying to match up their lending requirements with a private lender that is prepared to provide the best offer for a particular scenario.

The keys to achieving the best private mortgage rates and terms are 1) having enough time to find private lender offerings that are well suited to your needs, and 2) working with a well connected and experienced private mortgage broker who can get you speaking with private mortgage lenders that are a good fit for your requirements.

If you’re in need of a private mortgage, or would like to consider it as a viable alternative, I suggest you give me a call so I can quickly assess your requirements and provide private mortgage lending options for your immediate consideration.

Click Here To Speak Directly To Toronto Private Mortgage Broker Joe Walsh

Toronto Private Money Lenders

“We Represent Toronto Private Money Lenders For Private Mortgage Financing Transactions”

As a private mortgage broker, I am fortunate to have a number of quality Toronto Private Money Lenders that are looking to place private mortgages in Toronto and other parts of The GTA and Southern Ontario.

Each of our lenders have their own lending/funding requirements as well as property interests, but collectively they cover off a broad spectrum of both the residential and commercial market space in the Toronto area.

For instance, we have some very conservative lenders that are always on the look out for good deals and can provide rates in the 6% to 7% range, depending on the deal.

We also have private money lenders that will consider higher risk deals and will provide rates and terms that are in keeping with the inherent risk with any particular property.

In general, from the time of application to funding, our average turnaround time is 10 business days with a commitment to fund typically provided a couple of days after applying.

That being said, if there is a need to get a mortgage in place in a hurry, we do have the ability to get deals approved and funded in two to five business days as well, provided that all the lender requirements can be met right away, and the borrower has a highly responsive lawyer who is going to be available to complete the transaction.

The process for funding starts with a phone call into our office at which time I will do a quick assessment of your situation with you and provide you with whatever options we have available at that particular point in time for the type of deal and location you have outlined.

If one or more of the potential private mortgage options we discuss is of interest to you, I will immediately call the relevant private mortgage lenders we work with and see if they would be interested in the deal.

Many times we can get a lender proposal back within a couple of hours and at most two or three days.

If you’d like to proceed further then we will require a completed application as well an appraisal of the property.

If you trying to locate Toronto private money lenders to fund a deal, I suggest that you give me a call so I can quickly assess your situation and provide relevant private mortgage options for your immediate consideration.

Click Here To Speak With Private Mortgage Broker Joe Walsh For A Free Assessment Of Your Private Mortgage Options

Private Mortgage Lending Information

“Here’s More Information About The Private Mortgage Lending Services And Information We Provide”

Evolution Of Private Mortgage Lending

“Private Mortgage Lending Continues To Expand And Evolve Across The Real Estate Market”

Over the last number of years, private mortgage lending has been growing in terms of 1) the amount of funds available, 2) the number of private lenders, and 3) the applications for private financing.

There are many contributing factors to this including 1) sub par stock market performance over the last decade or so, 2) baby boomers wanting to move all or part of their investment portfolios into more short term or highly liquid investments, 3) institutional lender being more conservative on the types of deals they are prepared to fund.

With more fund available from more lenders there is also broader coverage of the market with many private lenders targeting very specific areas and niches of the mortgage market.

Private lenders are also acting more and more like banks as there are more mortgage investment corporations and collaborative private lender arrangements in place today than ever before, providing a similar type of financial store front approach to the market place.

That being said, the majority of private mortgage lenders are still individuals who are managing their own investment portfolios and making their own decisions.

For an individual or business looking for mortgage financing, the new world of private mortgage lending can provide considerable options and choices.

In some situations, private lenders will even rival what a bank or institutional lender will offer in terms of interest rates making them a realistic option for more than those with bad credit or in financial distress.

While private mortgage lending remains a short term form of mortgage financing for the most part, it can provide a number of unique advantages that can’t be found through a bank or institutional lender.

For instance, a private mortgage can be arranged in a fraction of the time that it takes to get a bank or institutional mortgage in place. When time is of the essence, a private mortgage can be a preferred option to close on a real estate purchase, refinance an existing mortgage, or provide capital for some other purpose.

In some cases, businesses utilize private mortgages to secure short term capital in order to provide them with time to go through an institutional borrowing process that is hard to predict in terms of time.

As private mortgage lending continues to evolve, borrowers will have more choice available to them in the market, which is almost always a good thing.

If you are in need of a private mortgage, or would like to better understand your options for mortgage financing, I suggest that you give me a call and we’ll go over your requirements together.

Click Here To Speak With Private Mortgage Lender Joe Walsh For A Free Assessment Of Your Private Mortgage Options

Versatility Of Private Money Lending

“Private Money Lending Is One Of The Most Versatile Forms Of Financing Available”

Because Private Money lending can be utilized for such a broad arrange of requirements and because private mortgage terms can be structured according to a given situation, private mortgage financing becomes one of the most flexible forms of money available.

It can also be the most misunderstood forms of lending as well.

While the mindset and level of understanding is rapidly changing, I would still say that the majority of people consider private money lending as a last resort option for the desperate.

However, no private mortgage can ever be arranged if their is no equity in the property, so considering any form of unsecured financing or equity investment, private lending is on much stronger ground from a lending and risk management point of view.

As a society, we are conditioned to believe that our banker can provide for all of our needs, regardless of what they may be.

But the reality is that bank financing, of any sort is very rigid in terms of qualifying, and the objectives of the bank are to only provide low risk loans.

In reality, there are many situations that occur every day where money is going to be required for some period of time that will not fit into the bank’s requirements or definition of risk.

And when the risk of financing is higher, there has to be a more customized approach to financing to take into account the specifics of any particular situation.

This is where private money lending comes into the picture.

Private lenders as a whole, will consider and price requests for financing based on real estate security that a bank or institutional lender would not consider.

And private mortgage rates can be very similar to that offered to a bank as long as the associated risk is low enough to justify near bank type rates.

As the risk goes up, so do the rates.

But even for higher risk situations, money is still available at a relative price, versus not being available at all through an institutional lender.

From a versatility point of view, private lenders are more capable of creating a lending offer that allows the borrower to receive financing and the lender to protect their risk.

For example, in development situations where the acquired cash is going to be used to create a future cash flow, a lender may built prepaid interest into the deal so that the borrower does not have to service debt in the short term.

In another situation, proceeds from a transaction may be directed to the lender to either service the debt or pay it down.

The possibilities for use are fairly endless, and the process for finding a solution relatively short compared to alternatives.

And yes, a common theme for people that utilize private mortgages are that they are in a hurry or perhaps are even desperate to raise capital for a particular purpose.

But at the same time, their desperation has been created by wasting months trying to get financing from a bank in the first place with no end in sight to the applicant process.

If you have equity in a property and would like to try and leverage it to generate funds for some purpose and either do not qualify for financing at the present time with a bank, or you do not have time to work through the more protracted bank application process, then private mortgage financing may be the best fit for you.

Click Here To Speak With Private Mortgage Broker Joe Walsh For A Free Assessment Of Your Private Mortgage Options