Private Mortgage Pros And Cons
“Here Are Some Of The Key Considerations Surrounding Private Mortgage Financing”
As a mortgage broker, probably the thing I like the best about private mortgages is the flexibility to utilize this form of mortgage financing in so many different situations.
Private lenders are typically individuals that make their own assessment and lending decision and if they are comfortable with the case for financing, as well as the risk related to the deal, they will issue a commitment to fund the deal.
When we’re working to place funds through a bank or institutional lender, the requirements of the lender are more cut and dried and basically inflexible. Working with large transactional volumes requires a consistent application of lending criteria in order to efficiently process and approve deals. That makes a good deal of sense from a business point of view, but it can be frustrating for a borrower if they don’t quite fit into the lender’s box.
This where private mortgage lenders can provide tremendous value in the market place due to the fact that they control the ability to customize their approach to any given deal and potentially fund good deals that are not quite bankable or fall between the institutional lender cracks so to speak.
A major con of private lending that most borrowers don’t understand is that private lenders want to assess and fund deals quickly as they have funds available to put out in the market. Idle money doesn’t earn them a return, so they are interested in finding suitable deals and funding them.
Where the con comes in is that most borrowers don’t realize or appreciate that once they receive an offer to finance from a particular private lender, they need to act quickly on it or it may not remain available to them.
Unlike a bank that really has no limit to available funds, a private works with a finite money pool and if someone is waiting too long to accept an offer for financing, the private lender may very well place the funds into another deal.
Many times borrowers will shop the market and gather different quotations, circling back to different quotes over a period of time. While this approach may work with a bank or institutional lender, its certainly not guaranteed to work with a private money lender.
The key here is to start the financing process with a private lender knowing that if he or she give you 5 business days to accept an offer and you don’t accept it, there is a very good chance that it may not be available to you weeks or months later.
And while that may not seem like a particularly big deal, many times there is a sense of urgency around private mortgage financing requests and if you take too long and miss out on an offer, there is no guarantee you will find a suitable replacement in the time you have to work with.
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