Private Mortgage Misconceptions
“Private Mortgage Lending Can Be Greatly Misunderstood At Times”
There are many that hold the perception that private mortgage lenders will finance just about anything, but at a higher rate of interest and larger lending fees.
Another misconception is that all private mortgages are going to carry very high rates of interest that should only be considered as a last resort.
Let’s look at each of these in a bit more deal.
Will private lenders provide some amount of mortgage financing on just about any type of real estate or real estate based project.
The answer is clearly No for many of the same reasons that a bank or institutional lender would not be interested in the property…is there any known or potential environmental liability associated with the property? Is there an active resale market for the property? How much of a headache is the borrower going to be in terms of making payments? What is the exit strategy to repay the mortgage at the end of the loan term?
While private lenders are prepared to take on more risk when borrowers have weak credit or thin repayment, they are still looking for good properties to invest in that have some type of active market for resale if required.
With the tightening up of environmental laws as just one example, private lenders are now asking for environmental audits just like the banks and many times won’t consider a property without an environmental report that can provide a no risk or low risk opinion by a qualified auditor.
Its not unusual to find that no one is prepared to lend anything on certain properties in certain areas at certain points in time at any lending rate.
In terms of interest rates, the private mortgage financing space has become more and more competitive in recent years, especially for lower risk properties that are of higher quality and higher marketability. In many cases, private rates can come very close to bank rates and while private lenders are not typically a long term financing solution, they can be an excellent short term financing solution that is actually easier on the cash flow when interest only payments are required at competitive rates.
Higher interest rates are based on higher risk and less lending competition. If you’re property falls into the high risk, low competition category, then yes, you can expect to be paying pretty high interest rates on a private mortgage, provided there is a private lender prepared to extend financing.
Because there is also such a broad and wide spectrum of private lenders, that it can be easy to get a less competitive private mortgage offering that what may exist for your property and financial profile.
The best way to get the best available deal is to work with a Toronto mortgage broker that has direct access to large number of private mortgage lenders.
About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel