Mortgage Refinance And Private Money
“Mortgage Refinance Can Be Both Completed And Avoided With Private Mortgage Financing”
A Mortgage refinance is typically done with a private mortgage in situations where credit and cash flow have deteriorated to the point where refinancing a mortgage is not going to be an option with a bank or institutional lender because of these stricter financing requirements.
Private lenders, for the most part, are going to be more expensive than a bank or institutional lender in a mortgage refinancing scenario, but if the borrower is just below the bank or institutional credit and funding requirements, they can still secure short term private financing that is only slightly higher that what they could get at a bank, especially if the loan to value is below 60%.
In most cases where private mortgage financing is used to refinance one or more mortgages it is because borrower has run out of options and must payout out their existing lender and/or generate additional funds for some other purpose such as debt consolidation.
On the flip side of the coin, private money can also be used to avoid a first mortgage refinancing in some cases.
For instance, there are times when incremental capital is required by the borrower, but a refinancing of the first mortgage would potentially lead to a higher rate alternative, especially if the borrower is in any type of financial and/or credit distress.
But if the first mortgage is up to date, its likely the borrower can carry on without disturbing it without the lender having any issue with their financial position.
In these situations, it may make more sense to leave the bank or institutional first mortgage alone and instead get a private second mortgage in place to generate the incremental funds required.
The private second mortgage will come at a higher rate, but the weighted average financing cost between the low rate institutional mortgage in place and the smaller private second, could still be significantly different that refinancing the first mortgage at perhaps a second tier institutional lender, or even private lender.
The best way to work through these different mortgage refinance options is to work with an experienced private mortgage broker that works directly with both private mortgage and institutional mortgage sources.
Having this type of expertise at your disposal will go a long ways to helping you determine the best course of action for your situation and mortgage refinancing requirements.