Private Mortgage Parachute
“A Private Mortgage Parachute Can Save You From A Bank Financing Deal Gone Bad”
There are times when a private mortgage option can be your best friend.
And while it may not have been your first or primary choice of financing, in the end it can come through and save the day for a lot of “A” quality lenders.
Let me explain.
One of the challenges with securing cheaper forms of money is that there can be a lot of requirements that go along with the commitment to finance.
And even if the borrower has every intention of meeting all those conditions, there are times when life conspires against you and puts you into a position where the money needs to be advanced but can’t because someone hasn’t done something yet or something hasn’t happened that was supposed to happen by now.
When an “A” lender gets into this situation, then it comes down to which is the lesser of the evils? That is, do I go and get myself a slightly more expensive private mortgage option in case things don’t get figured out in time, or do I risk what can happen if I don’t meet my deadlines?
The risk of what could happen can vary considerably.
For a real estate transaction, you could miss out on the opportunity to purchase a property at a great price.
For a construction project, you could risk having the project stall out and end up breaking contracts with builders and suppliers and others.
For a business man that needs capital to fund a transaction, the risk is losing out on the margin in the deal and potentially destroying your credibility for future dealings with that customer as well as the bad well they may spread about you.
When real estate financing is involved, if the bank or institutional solution is taking too long to get into place, or there is some snag that is not allowing it to proceed, then the next best step is to go and get a private mortgage option lined up that can solve the problem.
Then, if you get to the point that time is about to run out, you can pull your private mortgage parachute and get things completed for a few extra dollars, which is likely going to be cheap compared to the costs and/or lost opportunity of not getting the bank financing closed in time.
This is just a sound business and financial management practice where the right decision is typically going to be the next lowest cost option.
If things do work out with plan “A”, then you carry on as planned and don’t exercise the private mortgage option you have arranged.
Either way, the deal or transaction or whatever can proceed as planned without further disruption or delay.
If you find yourself in a bind trying to get financing completed regarding a real estate transaction, please give me a call as soon as possible so I can quickly assess your situation and provide you with private mortgage financing options for your immediate consideration.