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Category Archives for Private Mortgage
Equity Is The Key To Private Mortgage Lending
“The More Equity You Have In A Property, The Greater Your Private Mortgage Lending Options”
Private mortgage lending is basically an equity based form of lending where lending opportunities are many times born out of an applicants inability to satisfy the credit and cash flow requirements of bank or institutional lender which are also lower cost lenders.
That being said, private mortgages are not only provided to individuals with bad credit and/or weak cash flow. There are many times when private lending is a preferred option due to insufficient time to get a bank mortgage in place, especially when you’re talking about a commercial or industrial property that requires financing.
But regardless of the borrower’s circumstances, equity is always going to be be key element to getting private mortgage financing in place.
And equity can help create very different private mortgage financing options.
For instance, someone with great credit and cash flow has the potential to secure private mortgage rates that are close to what banks or institutional lenders will offer in situations where the loan to value after private mortgage financing is no greater than 60%. Individuals that fit this description would go the private money route if a flexible, short term financing options was the best fit for their requirements, especially if there is a time pressure to get funding in place.
On the other end of the spectrum, there are those individuals with bad credit and poor cash flow that will likely be able to find a private lender that will finance their property, provided that there is enough equity in the property to cover off all the risks that the lender may be taking on. Higher risk will also likely mean higher costs, but without a debt equity ratio of 50% to 60% or lower, there may not be any type of deal available.
The in between scenario is when a borrower is just below the bank requirements and needs 6 months or a year of additional cash flow documented and/or an improvement in credit profile to qualify for the lower cost source of bank financing. This can be an ideal financing opportunity for a private lender, and the more equity in the deal, the more competitive the rates, fees, and terms will be.
If you have equity in a piece of real estate property that you are having difficulty financing, I suggest that you give me a call so I can quickly assess your requirements and provide private mortgage lending options that meet your requirements.
Private Mortgage Customization
“Private Mortgages Can Many Times Be Customized To Meet The Borrowing Requirements”
One of the potential advantages of a private mortgage is the ability of the private mortgage lender to customize the deal to meet the borrower’s requirements.
When we’re talking about banks and institutional lenders, the mortgage programs tend to be very rigid with very little room for flexibility to meet certain requirements of a particular borrower.
Basically, when it comes to conventional lenders, you either fit the box or you don’t, even if you can come up with a customization suggestion that is good for both sides.
The difference with a private mortgage lender is that the lender in many cases is one individual, who can basically make up whatever rules they want for any given transaction.
And if a suggestion is made that can get the deal done while not creating more risk to the lender, then there is a good chance that it can be incorporated into a deal.
Keep in mind that all private lenders are separate lending entities, each with their own ability to customize, or not customize a mortgage request at any given time.
So if you have a mortgage financing request that doesn’t quite fit any of the available bank or institutional mortgage programs out there, then you should next look to a private mortgage broker who can in turn direct you to a source of mortgage financing that is not only going to be interested in the deal, but has the ability and the willingness to think outside the box to get a good deal completed.
The private mortgage broker is important in the equation as he or she will know right away if one of their lenders is capable of meeting the requirements of the mortgage request.
The alternative is going from one private lender to another at random to see if you can find one that is prepared to fund your requirements.
If you have a bit of an unusual deal that can’t get done at a bank or institutional lender, but still has good strong borrowing characteristics, then I suggest that you give me a call so I can quickly go over your requirements and provide private mortgage options for your immediate consideration.,
Click Here To Speak With Toronto Private Mortgage Broker Joe Walsh
Private Mortgage Requirements
“Private Mortgage Requirements Can Be Substantially Cheaper Than Low Rate Alternatives”
Before you get too hung up on a commercial mortgage interest rate in the 4% to 6% range, think about what its going to cost to get the mortgage in place.
After you’ve paid for a new appraisal, a new environmental audit and potentially some clean up, and a new set of financial statements to start with, you can easily have dropped somewhere between $10,000 and $20,000 and watched several months go by which may have ended up costing you even more money.
Not all the time, but in more instances than you might think, private commercial mortgages can get done with dated information. If the information is still representative of the real estate being offered as security, its not uncommon for private lenders to utilize appraisals and environmental audits that are several years old. And because current financial statements are less critical to equity based lending decisions, the most recently completed financial information can work just fine with a large number of private lenders.
This is the place where logical and common sense come into play as you’re dealing with a seasoned investor in many cases who does not need to force you to spend a bunch of money to update information that is unlikely to add any value to their lending decision.
When this is the case, the application, approval, and funding process can go quite quickly compared to what you would be facing with most bank or institutional commercial lending processes.
In the end, like everything else in business, its all about time and money.
And in certain situations, the private mortgage requirements you need to meet on a mortgage commitment may end up saving you both in the short term, with short term lending being the primary purpose for private mortgages in the first place.
The point here is not to get overly focused in on rate and to make allowances for all the costs that you’re going to incur to get a mortgage in place as well as the time its going to take.
If you are in need of a private commercial mortgage right away, I suggest that you give me a call so we can go through your requirements together and discuss the most cost effective and timely options available to you.
Challenges With Private Mortgage Shopping
“Private Mortgage Options Can Be Destroyed By Excessive Shopping”
When it comes to private mortgage shopping for rates and terms, its something you need to be a bit careful with if you can.
In the world of residential mortgage financing through a bank or institutional lender, rate shopping is broadly accepted due to 1) the competitive nature of the market; 2) high deal volume; and 3) the relatively small amount of work and time it takes to process an application.
In many cases, the mortgage broker will enter the information in online and the lender’s computer system will spit out an offer for financing.
But with private mortgage lending, this is a different deal all together.
Private lenders are many times single individuals with funds available to invest in the mortgage market.
Because both their funds and time are limited, most will focus on deals that not only fit their lending and funding requirements, but also are ready to move forward to closing.
In many cases (certainly not all) when a private lender receives multiple applications for the same deal, there is a good chance that the private lender will decline the application and move on to the next one.
When its obvious a deal is being broadly shopped, many private lenders will pull out of the running and spend their energy on applications where they believe they have more exclusivity to the deal, or at least feel that there are less other lenders involved.
Let’s further explore how this happens in the first place.
Most mortgage brokers do not have direct access to private lenders and instead try to access private money through their network and other mortgage brokers.
The result is that several brokers get involved and start sending the application around to many of the same private lenders.
Therefore, its important that an applicant for private mortgage lending is making sure that their application is not crossing paths as much as possible so that otherwise good lending sources and options don’t disappear on them.
There are a couple of ways to do this.
First, make sure that you are dealing with a private mortgage broker who has direct access to private lenders. Instruct your broker to only contact private lenders directly and not engage additional mortgage brokers.
Second, if you want to utilize more than one mortgage broker, engage them one at a time. If a broker truly has direct private money sources that are interested in the deal, he or she should be able to come up with a term sheet for you in three to five business days. If they can’t, then they don’t likely have any direct access and are just hunting around, trying to find a private lender for you.
So you don’t have to provide exclusivity for very long. If you aren’t getting anything back from your broker in a week or so, then consider another private mortgage broker. If the deal ends up crossing paths it shouldn’t matter as any lender that will see it more than once will have declined the deal the first time around anyway.
If you are in need of a private mortgage for residential or commercial property, give me a call so I can quickly assess your requirements and provide private mortgage financing options from my direct lender contacts for your immediate consideration.
Click Here To Speak With Toronto Private Mortgage Broker Joe Walsh
Private Mortgage Rate Shock
“Private Mortgage Rates Are Often Surprising To Borrowers That Have Only Paid Conventional Interest Rates In The Past”
If you are considering a private mortgage for the first time, you may have a bit of sticker shock when comparing private mortgage interest rates to conventional mortgage rates.
Private money is more expensive and is that way for a reason.
The risk of the financing being considered is either higher resulting in the higher cost of funds, or the process is streamlined for faster access to capital, which also comes at a cost for providing the service.
How much higher are private mortgage rates?
If you’re talking about a first mortgage on a residential or commercial property, private lending rates typically will fall in the 7% to 11% range, where conventional mortgages fall more into the 3% to 5% range.
So in some cases, private interest rates can be significantly higher.
That being said, when there is a large competitive interest in financing a mortgage, competition will almost always drive rates down.
So when you have private mortgage rates that are at the higher end of the range, its likely because there either aren’t enough interested lenders, or there aren’t very many interested lenders that can move as fast as you require.
Remember that a private mortgage is short term lending instrument that basically allows an individual or business to transition from one financial position to another by providing the commodity of time.
Most private mortgages are for a period of one year.
During that one year period, the borrower has the opportunity to improve his or her financial position in order to qualify for bank or institutional financing, sell the real estate security in order to preserve the equity value, utilize the cash from the private mortgage to complete a transaction whereby the proceeds from same can repay the private mortgage.
Rest assured that if there was a significant enough of a market, and a large enough profit opportunity for equity mortgages where pricing could be lower, banks and institutional lenders would be providing mortgage products to this market segment.
But they are not.
In fact, one can argue the sub prime mortgage offerings from some institutional lenders are more expensive and restrictive than comparable private mortgage offerings.
The other thing to consider when it comes to interest rate is the cost of financing compared to what will happen if you don’t refinance your mortgage or raise the incremental capital you’re looking for.
The opportunity cost of missing out on a great transaction, be it real estate or something else, can be considerably more than the interest paid on a private mortgage.
In situations of conventional mortgage distress where the lender is demanding full repayment or is in the midst of foreclosure, the cost of a private mortgage can be a small fraction of the amount of equity that can be destroyed from losing your home as well as the incremental living costs you are going to incur moving somewhere else.
Basically, any financing cost is relative to the risk of the situation being financed.
Private mortgage rates are no different in this regard.
If you would like to learn more about private mortgage rates and financing options, I suggest that you give me a call so I can quickly go over your situation and discuss different alternatives with you.
Click Here To Speak With Toronto Private Mortgage Broker Joe Walsh
Private Mortgage Exit Strategy
“Do You Have A Clear Private Mortgage Exit Strategy To Repay Your Mortgage?”
A private mortgage exit strategy is simply the plan you are working towards to repay your private mortgage when it reaches maturity.
Most private mortgages are only for a period of one year, so at the end of that time, the mortgage will need to be repaid in full in most situations.
In many cases, a private mortgage in put into place to relieve some sort of financial pressure or meet a deadline that has come due.
Once the immediate crisis of capital requirement is dealt with from private mortgage funding, the borrower may be inclined to relax a bit now that a certain degree of cash flow stability is back into place.
But you also need to be careful not to become too complacent.
A year can come and go rather quickly and, depending on your private mortgage exit plan, there may be several steps and actions that need to be completed which will all take time.
Once the year is up, unless you have the right to an extension or a renewal of your private mortgage, the funds advanced will need to be repaid and if you don’t have the ability to pay up, you could risk falling into a foreclosure action.
Some borrowers just assume that if they need more time, a private lender will grant it to them, but that can be a dangerous thing to rely on in that the private lender may have another intended use for those funds and may not be able to grant the extension or a renewal.
This is why its important to have a plan of attack for repaying the private mortgage before funds are even advanced.
And in some cases, a good exit strategy will actually improve not only your ability to get funded, but potentially increase the amount of funding you can receive.
But if your private mortgage exit strategy isn’t going to plan, then contact your private lender early on and make him or her aware of your situation so that plans can be made on both sides to avoid a problem at the maturity of the mortgage.
Basically, don’t wait to the last minute and then spring it on the private lender that you need more time to repay the mortgage, assuming they are going to automatically grant you an extension.
The key points here are to have a plan in place that you are working towards, and to manage the time you have available so that you can retire the private mortgage on time without incurring any additional costs.
Private Mortgage Application Form
To View A Copy Of Our Private Mortgage Application Form,
Click The Link Below.
Private Mortgage Application Form
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The Mortgage Application Will Be Saved As mortgage.application.pdf At The Location You Selected On Your Computer
Once The File Has Been Saved, Locate The File On Your Computer, Click On It And A PDF Reader Will Open It Up For You.
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Vaughan Private Mortgage
“We Locate And Secure Vaughan Private Mortgage Financing Through Our Private Lender Network”
A Vaughan private mortgage can be arranged on residential, commercial, and industrial property in the Vaughan area through the private lenders we work with.
Our individual lender relationships will consider private mortgage placements in first or second mortgage position and the use of funds can range from new mortgage, mortgage refinancing, debt consolidation, and construction financing.
Each lending scenario tends to be somewhat unique, so its our job to get a solid understanding of your lending requirements and then match you up with a private mortgage lender that is capable of providing the financing you are looking for.
And while me and my team have a very solid track record of locating and securing private mortgage financing for our Vaughan area clients, there may be financing requests that we also may not be able to help you with. If this is the case, our goal is to determine this as quickly as possible so that neither of us are wasting our time on a deal that perhaps needs to be be funded else where if at all.
The key to securing a Vaughan private mortgage through a private mortgage broker starts with having sufficient equity in a piece of real estate property.
Private mortgage lenders are equity lenders and as long as the property is in reasonably good condition with equity available in it once a mortgage is put into place to cover off the lender’s risk, then there is a good chance that something can get arranged.
The average time to complete a deal from time of application to funding is about two weeks.
That being said, if you are in a real time crunch, and have everything in order, it is possible to get a Vaughan private mortgage in place in two to five business days.
Private mortgage rates, terms, and conditions are going to depend on each specific deal and a quotation for financing on average takes 24 to 48 hours to get put together. Its also not unusual for some private lenders to provide a term sheet back in a matter of hours of getting a deal for review.
Basically, the length of the process has everything to do with how well the application is documented and the quality of the property offered as security.
If you’re in need of a Vaughan private mortgage, or would like to learn more about the private lending process, I suggest that you give me a call so we can quickly go over your requirements and discuss relevant private mortgage options for your immediate consideration.
Private 2nd Mortgage Uses
“When Does I Make Sense To Utilize A Private 2nd Mortgage?”
A private 2nd mortgage can be utilized in a number of different financing scenarios.
The most common application of a private 2nd is when a borrower has equity remaining in their property, wants to leverage it through additional mortgage financing, but can’t qualify for additional funding from a bank or institutional lender, and does not want to lose the good rate they have on the current first by refinancing with a sub prime lender.
This is a very common occurrence in situations where someone’s credit card debt has built up and their credit has been strained or damaged as a direct result.
The private second mortgage can quickly provide the funded necessary to pay off or pay down the credit cards, instantly improving your credit profile and potentially your cash flow at the same time.
While this is the most common use of a private 2nd mortgage, there are many others as well.
For instance, in the construction market, its very common that construction loans are provided to the builder or property owner as a private second behind the existing mortgage that was put in place to originally acquire the property.
At the end of the construction period, it the existing owners are going to occupy the property long term, a take out mortgage is arranged against the property to pay out both the first and second mortgages that are in place.
Still other applications for a private 2nd mortgage are when a short term source of capital is required for an activity related or unrelated to the property the mortgage will be registered to.
Because private second mortgages are equity loans, as long as the property has enough equity to cover off the risk of the lender, private funds can be acquired for a number of different short term or bridge financing requirements.
Depending on the property and the borrower profile, private mortgage lenders will typically go as high as 85% loan to value on a private mortgage second with rates that will be two to three percentage points higher than a private first mortgage on the same property.
If you are in need of a private 2nd mortgage, you need to be working with an experienced private mortgage broker who can quickly assess your situation and provide you with private second options for your immediate consideration.