Equity Is The Key To Private Mortgage Lending
“The More Equity You Have In A Property, The Greater Your Private Mortgage Lending Options”
Private mortgage lending is basically an equity based form of lending where lending opportunities are many times born out of an applicants inability to satisfy the credit and cash flow requirements of bank or institutional lender which are also lower cost lenders.
That being said, private mortgages are not only provided to individuals with bad credit and/or weak cash flow. There are many times when private lending is a preferred option due to insufficient time to get a bank mortgage in place, especially when you’re talking about a commercial or industrial property that requires financing.
But regardless of the borrower’s circumstances, equity is always going to be be key element to getting private mortgage financing in place.
And equity can help create very different private mortgage financing options.
For instance, someone with great credit and cash flow has the potential to secure private mortgage rates that are close to what banks or institutional lenders will offer in situations where the loan to value after private mortgage financing is no greater than 60%. Individuals that fit this description would go the private money route if a flexible, short term financing options was the best fit for their requirements, especially if there is a time pressure to get funding in place.
On the other end of the spectrum, there are those individuals with bad credit and poor cash flow that will likely be able to find a private lender that will finance their property, provided that there is enough equity in the property to cover off all the risks that the lender may be taking on. Higher risk will also likely mean higher costs, but without a debt equity ratio of 50% to 60% or lower, there may not be any type of deal available.
The in between scenario is when a borrower is just below the bank requirements and needs 6 months or a year of additional cash flow documented and/or an improvement in credit profile to qualify for the lower cost source of bank financing. This can be an ideal financing opportunity for a private lender, and the more equity in the deal, the more competitive the rates, fees, and terms will be.
If you have equity in a piece of real estate property that you are having difficulty financing, I suggest that you give me a call so I can quickly assess your requirements and provide private mortgage lending options that meet your requirements.