Versatility Of Private Money Lending
“Private Money Lending Is One Of The Most Versatile Forms Of Financing Available”
Because Private Money lending can be utilized for such a broad arrange of requirements and because private mortgage terms can be structured according to a given situation, private mortgage financing becomes one of the most flexible forms of money available.
It can also be the most misunderstood forms of lending as well.
While the mindset and level of understanding is rapidly changing, I would still say that the majority of people consider private money lending as a last resort option for the desperate.
However, no private mortgage can ever be arranged if their is no equity in the property, so considering any form of unsecured financing or equity investment, private lending is on much stronger ground from a lending and risk management point of view.
As a society, we are conditioned to believe that our banker can provide for all of our needs, regardless of what they may be.
But the reality is that bank financing, of any sort is very rigid in terms of qualifying, and the objectives of the bank are to only provide low risk loans.
In reality, there are many situations that occur every day where money is going to be required for some period of time that will not fit into the bank’s requirements or definition of risk.
And when the risk of financing is higher, there has to be a more customized approach to financing to take into account the specifics of any particular situation.
This is where private money lending comes into the picture.
Private lenders as a whole, will consider and price requests for financing based on real estate security that a bank or institutional lender would not consider.
And private mortgage rates can be very similar to that offered to a bank as long as the associated risk is low enough to justify near bank type rates.
As the risk goes up, so do the rates.
But even for higher risk situations, money is still available at a relative price, versus not being available at all through an institutional lender.
From a versatility point of view, private lenders are more capable of creating a lending offer that allows the borrower to receive financing and the lender to protect their risk.
For example, in development situations where the acquired cash is going to be used to create a future cash flow, a lender may built prepaid interest into the deal so that the borrower does not have to service debt in the short term.
In another situation, proceeds from a transaction may be directed to the lender to either service the debt or pay it down.
The possibilities for use are fairly endless, and the process for finding a solution relatively short compared to alternatives.
And yes, a common theme for people that utilize private mortgages are that they are in a hurry or perhaps are even desperate to raise capital for a particular purpose.
But at the same time, their desperation has been created by wasting months trying to get financing from a bank in the first place with no end in sight to the applicant process.
If you have equity in a property and would like to try and leverage it to generate funds for some purpose and either do not qualify for financing at the present time with a bank, or you do not have time to work through the more protracted bank application process, then private mortgage financing may be the best fit for you.