Private Mortgage Bridge Loans
“Private Mortgage Financing Is The Ultimate Form Of Bridge Loan”
A private mortgage almost by definition is a bridge loan in that 90% plus of all private mortgages issued each year are for a term of one year.
So the short term nature of the instrument falls into the realm of bridge financing.
But as a source of bridge loans, private mortgages arguably hold the top rung in the ladder for a number of different reasons.
First, bridge loans that are not secured by real estate will typically have a more exhaustive lender assessment process as well as a loan administration process to protect the lender from risk of loss.
Remember that a bridge loan has a defined beginning and end and the source of funds or event that will provide the source of funds to pay out the bridge financing has been validated.
So when the lender has to depend on certain things happening in order to be assured that the bridge loan will be repaid in full and on time, more work has to go into the risk assessment and management process.
Bottom line, other forms of bridge financing are going to take longer to get into place. And when you’re really under the gun for time, its not uncommon to be able to get a private mortgage in place in less than a week provided you have everything in order to getting the deal closed quickly.
Second, as far as bridge financing goes, a private mortgage is likely going to be one of the cheapest, if not the cheapest, sources of bridge financing available to you.
Bridge loans for transactions like purchase order financing can command interest rates of 3% a month or higher along with lender and broker fees. In comparison, private mortgage interest rates are considerably less.
Third, private mortgages require you to pay interest only mortgage payments each month for the most part. You stay in control of you cash flow and as long as you are servicing the debt, the lender is not likely to be interfering in your business.
With other forms of commercial bridge loans, the lender can require considerable controls over cash flow and spending during the time the bridge loan is outstanding. These restrictions can make it difficult to manage other financial requirements you may have at times.
Because of the security being provided through the equity you hold in a real estate property, the private mortgage lender can act quickly, provide a reasonable rate, and stay out of your business when offering short term financing.
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