And while this is going to be true for the most part, there is a slice of the private mortgage lending market that offers what we’ll call premium private mortgage rates.
This category of private mortgage investor is looking for a near to zero risk investment, wanting to do better than what they are going to be able to get from CD, Bonds, T bills, and other low risk interest earning investments.
And because they still have a very low appetite for risk, they are only prepared to invest in private mortgages with low loan to value ratios, on strong commercial properties, with good cash flow.
For these types of deals, these premium private mortgage lending rates can fall in to the 5% to 6% annual interest rate range, which can directly rival anything you may be able to secure at a bank or institutional lender.
Even if the premium private rates are slightly higher than the banks, the cost of getting the mortgage in place may be lower, and if the debt servicing requirements are interest only, this can provide a significant cash flow reduction to an amortized commercial mortgage payment, if that is something that is important to you.
Another key benefit of these types of transactions is that you can negotiate very good repayment options from completely open to three months interest penalty.
So if you have a plan to liquidate a property in the near future, but still need to finance it until a sale is perfected, then this can be a great source of low cost short term mortgage financing.
Another scenario could be where you’re business and/or property does not fully qualify for bank or institutional financing at the present time (need three years past financials and you only have two; need longer term tenant agreements which you still require time to get into place, etc.).
Yes, this type of financing is available, but only for very low risk properties in strong real estate markets.
If you have this type of need and think you have a property that might qualify, then I suggest that you give me a call so we can quickly go over your requirements and review any premium rate private mortgage options that might be available to you.