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Private money
mortgages are loans secured by real estate made by a private lender
instead of a bank, lending institution or government agency. Private
money mortgages loans are short-term (generally six months to one
years) asset based loans. This means that the decision to lend is based
on the equity and value of the property being put up as collateral,
with the borrower’s credit being secondary.
The security for the loan
is based upon fact that the loan will be for no more than 80% of the
appraised value of the property (up to 85% LTVR on an exception basis only).
Rural properties outside major urban centres or older properties generally can expect a loan to value of no more than 65-75%.
WealthBridge specilizes in first and second private mortgage lending.
Why would someone be interested in obtaining a loan like this? The reasons are simple:
Problems in qualifying. The borrower and/or the income of the
property do not qualify for a traditional mortgage loan. It might be
credit trouble from the borrowers past, excessive debt or for self
employed borrowers an inability to prove income. In these cases the
private mortgage lender may be the only available source for funds.
While a traditional lender may look to the property, the borrower and
his/her credit, a private money mortgage lender is concerned with the
appraised value. The borrower's credit or income as a less important
factor in providing the loan.
Speed of closing the transaction. A conventional mortgage from a
traditional source may take between 60 and 90 days to fund. Traditional
lenders need to obtain a formal appraisal of the property, perform a
detailed examination of the borrower’s credit history and current
financial status, and review financial statements and tax returns for
both the borrower and the property.
A private money mortgage lender can usually complete a transaction
within 14 days. As the property itself is the main criteria in
determining loan approval, there is much less examination of the
borrower and the borrower's other properties. WealthBridge
can generally make a decision within 48 hours of receiving information,
whereas a traditional lender may take weeks to commit to the loan.
Privacy. Many borrowers may not want or be able to provide
personal financial information. They may be adverse to the hassles of
the application process associated with obtaining a traditional
mortgage loan. A divorce or business separation may necessitate keeping
financials under wrap. Current, accurate financials may not be up to
date. While all these would negate or at least delay his getting a
conventional mortgage, it should have no effect on the borrower's
ability to obtain a private money mortgage.
WealthBridge offers all the tools to locate the right private lender at the right price.
Rates
There are thousands of private lenders in Canada and quotes can vary from lender to lender.
Each investor will view the risk of each investment differently based
on their knowledge of the property, applicant and the market
environment.
Market
demands can also affect the quote. One investor could have excess cash
to invest so they may be willing to lend at a more attractive interest
rate just to get the business. Understandably, an investor with less
cash to lend will target investments that yield a higher return.
Renewals
You
need to ask about the renewal fees. You could be stuck with a huge
renewal fee at the end of the term. Our commitment letter clearly
indicates how much the renewal fee will be and are very competitive.
The Lender is important.
The
choice of private lender is also important. We only deal with
reputable and established lenders. You don't want to borrow from a
small private lender that will one day need their money back at the end
of the term (most private mortgages are for a 1 year term). This will
leave you scrambling to refinance your mortgage with another lender and
pay more fees.
Criteria.
PropertyThe main consideration for a private lender is the security (i.e., the property). We will want to know:
1) Where is the property?
2) How much does it appraise for?
3) What is the condition of the property?
4) How much equity do you have in the property?
Each lender will have their guidelines as to the level of financing
they can provide. As the financing level increases, you can expect
that the interest rate and fees will increase.
Rural properties are harder to finance. Lenders may limit their exposure to 65% -75% (or less) of the value of the property.
Credit.Private lenders will always want to see your credit report. However, at WealthBridge we see beyond the numbers, including your beacon score.
IncomeWe
work with a variety of lenders. Some will ask for proof of income such
as a job letter or tax return. Providing income confirmation could help
lower the interest rate. Some lenders will not require any proof of
income.
How Do You Choose a Mortgage Originator?
Obtaining
private financing is very different from obtaining a traditional
mortgage. There are hundreds of private lenders and there's really no
way to know who offers the best rates and fees at any one point in time
so choosing a good and honest mortgage originator is key.
Here is what you should expect from WealthBridge:
(1) Has access to prime, sub-prime and private lenders
- It may be that your deal may qualify through an aggressive
traditional lender.If this is the case, we will work to put you in a
prime mortgage whenever possible;
(2) No last minute surprises.-Your
deal will fund if you can meet the terms of the conditions of the
commitment letter. Rates, the cost of borrowing, fees and the renewal
fee will be disclosed in full on the commitment letter.
(3) Renewals - if it turns out that you need to renew your mortgage, our lenders charge reasonable rates;
(4) Working with reputable lenders
- You will want to deal only with reputable and established lenders.
If you deal with lenders with limited resources, they may need to get
their money back so they can invest elsewhere.
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