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