Category Archives for Private Mortgage
Defining Hard Money Lending
“What Is A Good Working Definition For Hard Money Financing?”
Hard money loans are basically another way to describe private mortgage lending, but there can be considerable variations to the further interpretation of the phrase.
For instance, some people consider this to be more like a loan shark where if you don’t pay your debt back you could get your leg broken or something like that.
This is more myth and legend than anything related to reality, at least with respect to how hard money works today.
As a working definition, I would say that hard money is strictly about providing equity based mortgages. And when private mortgages are extended to individuals or businesses with habitually bad credit, any failure to meet the terms and conditions of the mortgage, such as payments not made when due, typically will result in an immediate collection action by the lender which some may very as a “hard” manner in which to operate, but when you’re lending to someone who has a history of not paying bills and/or not paying on time, a hard approach to collecting monies outstanding is not unreasonable.
Most private lending does not fall into this more extreme definition of hard money as most private lenders do not want to deal with potential borrowers that are likely going to be a problem.
But regardless, many people still use the term “hard money” as a blanket definition for all private money lending.
In reality, private money is a very useful short term financing vehicle secured by real estate regardless of what anyone chooses to call it.
If you would like to learn more about hard money and private mortgage lending, I suggest that you give me a call and I’ll make sure you get all your questions answered right away.
Private Mortgage Rate Variation
There Can Be Considerable Rate Variation From One Private Lender To Another
One thing to be aware with respect to private mortgage lending is that there can be considerable variation in the rates quoted to you at any given point in time.
Even though private lending is a fairly competitive market place, not all private lenders will price a particular deal the same way.
All things being equal, a competitive market will produce competitive or similar rates for a similar product or service. But that is not always the case with private money rates.
There can be a number of reasons for this. Let’s explore the more common ones.
First, in some locations, there will not be as much competition and private lenders can be in and out of the market at any point in time. So the lenders that do exist can adjust their rates according to supply and demand.
Second, and arguably the most common reason for rate disparity is that a healthy number of people seeking private mortgages are in a rush and many times have to take whatever they can find quickly to protect a deal or avoid some type of cost. This allows lenders to be able to price their money at different levels for basically the same level of risk.
Third, some lenders will be more comfortable with certain types of properties than other lenders will be, creating a different perception of risk and therefore different pricing of rates.
The keys to getting the best available rates for a given type of property is 1) leaving yourself enough time to go through the financing process, and 2) working with an experienced mortgage broker who can match your requirements up with suitable lender offerings.
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