Private Mortgage Lenders Require Realistic Exit Strategies
“If You Want To Acquire A Private Mortgage For Real Estate Property, Make Sure You Can Offer The Lender a Viable Exit Strategy”
One of the current challenges for private mortgage lenders is their assessment of a viable exit strategy for any mortgage funds they extend.
Because the mortgage term is typically only one year, they need to have some degree of confidence that the property will have a near term resale market if in the event that the loan cannot be repaid on time.
And while private lenders are more than prepared to take back a property to cover off their outstanding mortgage advance, it still doesn’t do them any good if the property can’t be sold in some sort of reasonable time period. The alternative then is to hold on to the property until it will sell which can be highly profitable in certain cases due to property appreciation, but it also reduces the amount of capital they have available to provide new loans, which goes against the business objectives of most private lenders for most properties.
And in 2010, there are lots of private mortgages coming due where the borrower can’t get refinancing because the institutional lending market is so tight, and the resale market for related real estate still has not picked up to provide a near term liquidation option.
Therefore, one of the keys to being able to secure a private mortgage at the present time is providing the lender multiple potential exit strategies to consider besides the worst case scenario of taking the property back and liquidating it.
While most borrowers do not want to have to end up selling the property to pay back the private or turn title over to the lender in settlement of the debt, they also don’t provide a very convincing case as to how they plan to repay the lender in a years time.
The more planned out and feasible the exit strategy or strategies, the more likely you will get serious interest from private mortgage lenders in just about any geography and property type.
If you’re looking at private mortgage financing as an option for a residential or commercial property, I recommend that you give me a call so that we can first review the potential exit strategy and then find viable private mortgage options for you to consider.
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