Private Mortgage Lenders More Like Banks

“While There Is More Private Mortgage Money Available These Days, Its Not Necessarily Easy To Secure”

Private mortgage lending has moved out of the closet and more into the forefront these days as we enter the current era of asset based lending brought on by the recession.

Gone are the days when most private lenders would just look at the available equity in a property and make a lending decision based on their comfort level in taking over the property in the future in the event of default. While these types of private lenders still exist, the larger majority are evolving into quasi institutional lenders that still offer higher rates that traditional lenders, but not before a higher level of due diligence is completed.

The private mortgage money lending world is growing as stock market investors seek more secure investing opportunities and banks remain largely on the sidelines for less than stellar property financing opportunities.

The private mortgage loan is typically a form of short term bridge financing, and in the current economy there is an excess of these short term deals to go around even though there’s more private money available than ever before.

Here are some of the key drivers for the increasing number of private mortgage applications:

  • Traditional lenders are not providing mortgages for anything less than an “A” deal.   Many of the mortgage requests that would have historically been done by a bank or institutional mortgage lender are ending up on the desks of private lenders.   There is competition among privates for these higher quality deals which have resulted in lower interest rates for the better deals.
  • Business owners are not meeting their covenants or are in arrears and the bank is calling the loan.  In the current market, its not uncommon for an institutional lender to act quickly on delinquent accounts even if the business can clearly demonstrate that better days are ahead.   Private lenders step in to provide short term bridge financing until the business’s financing profile improves enough to return to a traditional lending facility.
  • Institutional Lenders Are Taking Their Time With Deal Assessment.  The recession has caused traditional lenders to be more cautious when making financing decisions, asking for more and more information before a deal can be funded.   The longer lead times put deals at risk and they end up being done with a private lenders in order to get closed in the time required.

And while private mortgage lenders are clearly open to all these types of deals, they are also getting more selective and doing more checking on each deal to make sure they’re not putting their money into a potential headache.

The new breed of private lender would rather not have to take the property back in default, and are very focused on the borrower’s exit strategy for repaying the private mortgage at the end of its term.

Click Here To Speak To Mortgage Broker Joe Walsh About Private Mortgage 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