Private mortgage lenders are referred to private individuals or small companies that specialize in issuing out private mortgage loans that are difficult to get from traditional financing sources including banks, government agencies, or lending institutions. These loans are usually short-term (between six months to 3 years), and the decision used by a private lender depends on the equity and the property’s value used as a collateral and not the borrower’s credit.
Private mortgage lenders from Toronto also give out loans to professional real estate investors who want to rehabilitate, acquire, or cash out equity in income generating property, and for individuals who cannot qualify to get conventional financing. They also help real estate investors who require immediate financing without the required financial documentation asked by most traditional institutional financiers. Private mortgage loans are important sources of extra money for individuals facing dire situations and circumstances or struggling with very low and poor credit profiles.
When interest rates of 14% to 18% are increased to 4 to 8 points, as a borrower, you will be required to pay more than 20% annually for your private mortgage loan. This is usually a great deal for private mortgage lenders, but why should you preserve into paying these incredibly high interest rates while conventional lending institutions interest rates are between seven percent and ten percent? Some of these reasons include the following:
Mortgages of conventional institutions usually can take up to forty-five days and ninety days to be approved; this is because such lending institutions need to get an appraisal of the value of your property, conduct a comprehensive examination of your credit history and evaluate thoroughly your current financial status.
However, private mortgage lenders can be able to complete a similar transaction within 7 to ten days according to the Sherwood Mortgage Group. Because they use your property only as the main criteria in determining the eligibility of your loan, they will need lesser information that results to a much quicker and faster approval process.
Private mortgage lenders are protected by lending at considerably lower LTV ratio of about sixty-five percent as compared to 80% – 90% for conventional lending institutions. Furthermore, a private mortgage lender can give you a final decision within twenty-four hours of getting your information, whereas conventional lending institutions mortgage loans have to be approved by loan committee that usually meet only 2 times in a month.