When it comes to private lending, there are a number of what I call myths as to what private lenders will and will not do with respect to mortgage lending.
These myths or misconception can get in the way of your ability to secure sub prime mortgage solutions from private investors.
By having a better understanding of fact versus fiction, you are placing yourself in a better position to succeed when seeking private mortgage financing.
So let’s get into the primary private lending myths and misconceptions.
Many times borrowers will not be prepared to disclose all their information and when a bank or institutional lender persists for full disclosure, the applicant will through up their hands and say they’ll just go private instead.
The view here is that privates will just lend money and they aren’t necessarily hung up on all the details and back story that led you to your financing requirement.
The reality is that private lenders are always going to concerned about conserving their capital, so while they may not require as much information as a bank or institutional lender, they are going to require enough information to properly assess their risk of investing in any particular deal. If the risk is assessed to be too high, they most certainly will not be providing a loan.
Bottom line, private lenders will not just do anything. Most won’t go high loan to value or enter into a deal where there isn’t a strong potential for exit and repayment. This fact alone can save you considerable time chasing money that may not be available to you.
There are many that hold the perception that all private mortgage financing is high rate, high fees which also relates to the term hard money.
The reality is quite the opposite.
Markets are always driven by supply and demand and the private mortgage market is no different.
Sure, rates are higher than bank rates, but rates and fees are relative to risk. If the risk is higher, the rates and fees stand to be higher as well.
If a private lender is pricing his or her money higher than the risk, then there are other lenders in the market that are more likely to be placing the deal.
Its not uncommon for people to speak of their fear that private lending is a greater risk to him in the event of default as compared to what they could expect from a bank. The thinking there is that in some way, a private lender will be more severe to deal with and can potentially provide a greater risk of property loss to the borrower.
This is again far from the truth as private lenders have the same legal rights as any other lender and follow very similar processes and procedures that you would see from just about any mortgage lender.
In fact, you may find that a private lender is more likely to work with you on a late payment or payment you would like to proactively delay making for some reason than what you might come across from an institutional lender.
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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