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.