Private loan » Private Lender

No Credit Check Lenders For Loans Over $5000 Dollars

admin — Thu, 27 May 2010 20:33:44 +0000

Are you looking for a personal loan of over $5000? Do you need this loan to have no credit check? There are no credit check lenders for loans over $5000 dollars, but they are not easy to find. Here are some of the better options for you to try when it comes to getting the loan that you need.

Prosper is option number one and they do check credit, but they do not judge you too harshly on your credit. They help match borrowers with private individual lenders that get to read your loan listing and decide whether they want to bid on your loan or not. They can fund the entire loan or just a portion of it. Sometimes you will have a group of people willing to invest a little in your loan and that will add up to your full amount.

Using collateral is your next answer. If you have a paid off car, then a title loan might get you where you need to go and many title loan dealers do not check credit. They check income and the value of your vehicle. They will usually loan up to about 95% of what your vehicle is worth.

You can also get a loan against a piece of property or land and if you do it with the right type of lender they will do a no credit check loan for you. These are usually private lending companies that are a bit harder to find, but they are out there.

Your last option is to find a private lender. This can be done through the classifieds and craigslist. Sometimes you just have to ask around and depending on what you need the no credit check lenders for loans over $5000 dollars for will depend on whether someone is willing to help you or not.

By: Gressly Stevens

When Do Hard Money Commercial Mortgage Loans Make Sense

admin — Sat, 22 May 2010 00:26:43 +0000

Privately funded, often called “hard money” commercial mortgage loans typically carry annual interest rates of more than 10% and charge origination points of 2%-4%. These kinds of rates and terms may seem restrictive, but when the situation calls for it, taking advantage of private lending is a smart business move.

When Time is of the Essence

In the commercial real estate game time truly is money. Experienced property owners, investors and developers will tell you that often speed of execution can trump interest rates and points. When facing a looming purchase option expatriation date, a pending balloon payment that’s coming due fast, an unexpected cost overrun or, worse, a foreclosure scenario business people don’t have time to wait the 60-90 days it can take to close a conventional bank loan. Unfortunately, there are times when your property or you project are on the line and nothing short of quick cash can solve your problem. Hard money lenders can make on-the-spot decisions and can close fast. One week funding is very possible and any legitimate private lender can close almost any deal in less than 3 weeks. Hard money is relatively expensive but it’s a heck-of-a-lot less expensive than losing your deal.

When You Have Credit or Documentation Issues

Conventional lenders will insist on large amounts of documentation and that the borrower(s) have decent credit. To start with, real estate investors must produce 3 years tax records, profit and loss statements, copies of leases, bank statements, building maintenance records and much more. Details will be verified and a deal can be killed because of an “I” that was not dotted or a “T” that was not crossed. Private loans, on-the-other-hand, are usually equity based and not driven by the strength of the borrower. Your credit may not matter at all. Hard money lenders do not have the bureaucracy and the regulations that banks, Wall Street and the insurance companies do. They routinely do deals with minimal documentation, sometimes without even a property appraisal. If your record keeping is in disarray, if you are missing required documents, if you have poor credit or you simply don’t wish to share so much personal financial information, then hard money may be your best (and only) option.

When You Need a Bridge

Private lenders are among the most efficient and professional bridge lenders in the financial services industry. When a commercial property owner or developer finds themselves in need of a bridge loan (short term, interim financing) they are well served turning to private funding sources. Very often bridge loans are used to “bridge” the time gap that can exist between their permanent financing coming on line and their immediate need for cash, such as when they have a closing in days but their bank can’t close their loan for weeks. Bridge loans are also an important method of dealing with construction cost overruns, when a few million dollars can get the project finished and ready for sell-out quickly. There are many situations that call for bridge financing and many private lenders exist for the sole purpose of providing it quickly.

When You Need To Make an Attractive Offer

Cash is still king and having a reliable hard money lender on your team is like money in the bank. If you tell a seller you can close on a prize piece of property in 10 days with all cash, you will get that sellers attention. Your competition is likely asking for a 30 day due diligence period and as-much-as 60 days to close. If you can establish credibility with a dependable private lender and you know what their loan criterion is, you can bid with confidence and the cash to back it up.

There is no denying that private loans are more expensive than conventional loans but consider that they are usually short term and can often make the difference between a deal closing and a deal falling through. A successful commercial development project or a profitable income producing building can make an investor millions over its life cycle. When all factors are considered, and your deal is on the line, hard money can be down-right cheap.

By: Glenn Fydenkevez

Hard Money Commercial Mortgage Loans – What It Takes To Get Approved

admin — Mon, 17 May 2010 14:09:14 +0000

Privately funded, hard money commercial mortgage loans require much less documentation than conventional, institutionally funded mortgages, and they are generally equity based and not dependent on the borrowers credit score. Decisions are made very quickly and private loans can close in less than half the time it takes to close a bank loan. For many commercial real estate investors and developers, hard money is a useful and dependable source of funds.

Private commercial mortgage lending is a straight-forward, no-nonsense business; if you meet the requirements you’re likely to get funded quickly.

Cash in the deal

The era of 100% financing is over. Private lenders may not have strict down-payment rules but, virtually all will ask that a borrower have skin-in-the-game. The borrower’s cash contribution does not, necessarily, have to come in the form of a check at the closing. The investor or builder will get credit for all money they’ve but into a building or tract of land. Money spent on hard costs, such as actual site work and soft costs such as engineering and architectural plans can and will be credited to the borrower as “hard equity” just like a large down payment would be. As a general rule private mortgage lenders will stay away from any project where the principal is not willing or able to bring 10% cash or hard equity to the deal.

Equity

Hard money loans are essentially equity loans. It is mandatory that any commercial real estate attempting to be financed through a private lender have substantial equity in it. Loan-to-value ratios (LTV) in the hard money sector are much lower than in conventional.

Do not expect to be approved for a loan of any more than 50% of the value of raw land, 60% on fully entitled land, or 65% on buildings. However, keep in mind that most private lenders will allow a good sized seller carry back or other 2nd position mortgage, as-long-as the total amount financed does not exceed 90% of the value of the collateral.

Credibility

Private, hard money loans are not credit driven, but that does not mean private lenders won’t check your credit report; they will. Like it or not your credit report speaks to lenders about your character and credibility. No matter how sweet a deal looks from an equity standpoint, few lenders will risk their capital on obvious deadbeat borrowers.
You do not have to have perfect credit, you don’t even need good credit, you can even get a hard money loan with poor credit, but you can’t have ugly credit.

Experience

Any builder or property owner with a track record of success will stand a better chance of getting funded than will a fist time investor or first time developer. Private lenders are savvy professionals and like to work with other professionals. If you are new to commercial real estate, my advice is to bring a seasoned professional in on the deal. You may have to give up some profit, but the deal is much more likely to go through. Once you have your name associated with a successful project or profitable building, getting mortgages will be a-lot easier.

With These Factors in Place, You Will be Approved

These are the main things private lenders are concerned with when they consider a hard money loan. If a borrower is of good character, has some experience (or has a partner with experience), and can show both hard (cash) and soft equity in a deal, chances are very good that they’ll easily qualify for a privately funded commercial mortgage loan.

By: Glenn Fydenkevez

Construction Loans Don’t Need To Come From Your Bank & Don’t Have To Take Three Months

admin — Mon, 10 May 2010 08:22:07 +0000

Many people do not understand why home construction loans are more difficult to get than standard mortgage loans. Lenders consider them “story loans”, meaning simply that there is a tale that leads up to the building plan. One common story is that the borrower is hoping to improve the value of his property. Another is that an investor has purchased a property and plans to resell it for a profit.

If you are the prospective borrower, you must be willing to share your stories and your plans, before you can get home construction loans. Your plan may not fit into the guidelines of standard mortgage providers like Freddie Mac and Fannie Mae. It may not fit the guidelines followed by the majority of commercial bankers. This is especially true if you never plan to actually live in the home. That is, if you are building or upgrading a home simply for investment purposes.

So, you may need to look into unconventional sources for home construction loans. Private lenders are becoming an increasingly popular source. The loans that they offer are sometimes referred to as hard money loans. Some people call them “hard-luck” loans, because they think of them as the last resort for someone with credit problems. The truth is that the majority of private loans go to rehabbers.

A private lender will still want to know your story and that you have a good plan. You will need to have some experience and some capital of your own, but they will often approve a loan that a commercial bank would deny. They can provide funding for purchasing and rehab construction loans. If the difference between the after improvement value and the purchase price is good, they can even roll in the closing costs. In any case, the closing costs on private construction loans are lower than the closing costs on a conventional loan.

One of the biggest advantages for a rehabber is that closing is faster. Depending on the bank and their policies, it can take as long as three months to close on home construction loans. A private lender can close in as little as two weeks.

Another advantage…most banks will charge a penalty for early repayment. If you purchase a property for investment purposes, your goal is to get the repairs done, improve the value and find a buyer quickly.

Let’s say that you are able to get a bank loan. You make the needed repairs, find a buyer and resell the property six months later. If you repay the loan in full at that time, the bank will charge you a percentage (the amount varies) of the original loan value. Since they could not make the interest that they planned to, they still plan to get their share. Their share cuts into your profits.

If you choose the right private lender, there are no early repayment penalties for home construction loans You might want to look into it before you begin your next rehab project.

By: James Whitmore

Mobile Home Loan Freedom

admin — Sun, 09 May 2010 17:01:06 +0000

Did you know that you have to have a good reason to get a traditional loan? Banks will not dole out loans to anyone unless they know how you intend to spend loan money. Banks aren’t willing to let borrowers spend loan money any way they choose, and this can be entirely frustrating.

It’s within the interest of every bank to know exactly how a borrower will spend loan money. Why? This way, a bank can ensure that their money will be paid back. For example, no borrower can obtain money for a business venture unless the bank in question agrees upon the venture itself. Of course, in order to convince a bank that you will be spending money wisely, you’ll have to come up with a fairly concise business (or other) plan.

What happens when you need money, but your bank doesn’t see your cause as being a worthy one? In most cases, you’ll be instantly turned down for a loan. In other cases, a bank may decide to deliberate over the necessity of a loan for many weeks or months.

Then again, people who have bad credit won’t even be considered for a bank loan. When your record is marked with bad credit, banks won’t take a risk – it’s that simple. Unfortunately, this leaves a lot of people in need of money without any hope of a loan. In addition, it leaves many people scrambling to find a good enough reason to ask for a bank loan.

In stark contrast, a mobile home loan that is gained through a private lender is not restrictive in any manner. A private loan will allow you to use your loan money as you see fit. Whether you intend to take a vacation or make home repairs, your private mobile home loan is yours to spend in any manner.

In this way, mobile home loans allow people a lot more freedom when compared to a traditional loan. The best part is that private lenders do not base your loan acceptance upon your past credit history. All you need to apply for this type of loan is to own a mobile home.

If you can prove that your mobile home is yours, then you can apply for a private loan right away. You won’t have to wait for months, the application process is simple, and you will have your money in a flash. In short, a mobile home loan is the only way to go if you want complete and total loan freedom.

By: Molly Wider

Why Should I Consolidate My Student Loan?

admin — Sat, 08 May 2010 12:20:52 +0000

College loans are used to pay for assorted college related expenses; they’re usually offered as interest-deferred until the student leaves school. From the perspective of a lender, a college loan is a sound investment; most college students more than triple their immediate annual income after graduation, and this makes lending large sums (tens of thousands) of dollars very easy and sensible to do.

Most college loans have a grace period; during the first six months after leaving college, the loan doesn’t require payment, and isn’t accumulating interest – this window is meant to let the new college graduate find a job and settle in to their career, cover moving expenses and the like, before the clock starts ticking on their loan.

Unfortunately, the job market for new college graduates doesn’t always guarantee a lucrative starting career. Even with a good degree most students have to get an entry level position. Also, around that time in life, graduates are often getting married or having kids. These factors can turn a student loan into a nightmare of debt, as they juggle payments from multiple lenders and try to live within their means as other expenses accrue. Fortunately, there’s a way out. College loan consolidation lets you borrow a lump sum of money from another lender to pay off all your student loans. In return, you get a lower interest rate over a longer term; your monthly bills drop considerably; the monthly savings can be used to cover the bevy of new expenses you’ve got as you work your way into your professional life.

College loan consolidation programs in the United States come in two varieties – private and Federal. Federal student loan consolidation can happen if you have outstanding federal student loans that total more than ten thousand dollars, and are finished with school. If you do not fulfill these requirements, you must use a private lender.

Private lenders will look at your credit history and determine your monthly payments and interest rate. As with any private loan, it’s worth it to shop around, for lower monthly payments or better terms. It also makes sense to watch interest rates – if interest rates are low, consolidate your loans now before they rise again.

By: Nicholas Hurd

Profit From the Power of Ten – Ten Key Benefits of Private Money for Real Estate Investing

admin — Tue, 27 Apr 2010 20:52:54 +0000

Many of us have heard about private money, hard money, and other types of non-traditional funding sources for real estate transactions. It sounds good but you may not be fully aware of all of the benefits that private lending offers to you and your business. With that in mind, I would like to outline the top ten benefits of using private money in your own real estate investment pursuits.

Benefit #1: You are in control!!

The first benefit of private money that I’ll mention is probably the one that is the most important. Private lending gives you far more control over the buying process than afforded by either traditional lenders or even hard money lenders. How often do you get to negotiate things like interest rate with a traditional lender? These rates are generally predetermined and are dictated by your financial strength and/or credit score. Furthermore, the terms of repayment for traditional or hard money loans are rarely negotiable. They know they’re in the driver’s seat (because they’re the ones lending the money and they have clients willing to accept their terms if you choose not to) and pass along that knowledge to you via terms that they dictate. With private lenders, you negotiate the terms of the loan. Granted, the private lender has a say in it but you are in a stronger negotiating position because you are offering an opportunity they might not be able to find elsewhere.

Benefit #2: There is no limit to how much private money you can use on one project.

One of the greatest frustrations in traditional or hard money lending is that of the Loan to Value (LTV). With great credit and a solid income/asset portfolio, you may be able to borrow 100% of the purchase price for a piece of real estate. But what if you have less than perfect credit, limited or “hard to document” income, or desire to purchase land or a commercial property? In these cases, lenders want to see 10, 20, or even as much as 30% down to loan you the balance. This limits your ability to grow your business, even if you’ve found a tremendous bargain that is a sure winner.

Private money does not present the same rigid obstacles. Once again, remember you have the flexibility to negotiate the terms with your lender(s). This means you may borrow enough to fund the entire purchase price of the property if so desired. A private lender will likely want to see how good the investment is first before they will loan this high of a percentage. That is natural and you should be selecting quality investments for your private lenders in the first place. That being said, how cool is it that you can fund 100% of your projects, including repair costs, just by establishing the right relationships with your private lenders?

Benefit #3: Private money is less expensive to borrow.

While interest rates with private lenders may be comparable or slightly higher than with traditional lenders, the absence of third party involvement can dramatically reduce or even eliminate the closing costs and other fees that are normally associated with traditional loans. Furthermore, most private money loans have fixed interest rates and/or are based upon simple interest amortization so you don’t have to worry about floating adjustable interest rates or interest heavy payments in the early stages of a loan. It is also worthwhile to point out that many private lenders will willingly accept either a portion of the profit from the sale of a property or a fixed rate of return upon the sale, effectively eliminating any out of pocket costs during the loan. How many traditional lenders that you are aware of would defer interest payments until you sold a property for a profit?

Benefit #4: Private money is faster than going through banks.

One of the common complaints about traditional lending is that the process proceeds at the lender’s pace. This can mean as much as 30-60 days to close a loan, even if you are in compliance with all the lender’s requests. This amount of time may not seem like a lot but it may mean the difference between securing the deal of the year and not doing so, just by not being able to close quickly enough. In these cases, both you and the seller want to move quickly but traditional lenders will still operate at their own pace, regardless of the urgency at hand. Private lenders can often lend immediately because they have direct access to their own lending capital and thus dictate both when it is used and for what purpose. Once you have established a relationship with a private lender or lenders, you can act on these great bargains and know for sure how quickly you can close, without having to wait on the bank. Remember that a great real estate bargain will look as attractive to a private lender as it does to you so they have incentive to make things happen quickly to cash in on those opportunities you present to them.

Benefit #5: Having a source of cash allows greater flexibility for buying properties at a discount.

You’ve all heard the phrase “Cash is king.” Real estate is a perfect example of this, with the frequency of advertising that offers cash for houses, quick closings, etc. True, cash is a powerful leveraging tool with a seller, particularly one who is highly motivated and needs to sell very quickly. By definition, a cash offer only means that there is not a financing contingency in the contract. It doesn’t mean you have to have the money available yourself. Private money is a perfect example of a readily available source of outside funds. When you have this available to you, you have the confidence and the means to offer cash for some or all of your purchases. Faster closing times and cash purchases should translate into more attractive purchase prices if the seller is properly motivated. Lower purchase prices mean better bargains so this benefit of private money is huge, given its impact on your profit margin for each transaction for which you are able to offer cash.

Benefit #6: There are no lender “seasoning” issues or restrictions on loan amounts with private money.

Many investors are not familiar with lender seasoning issues and the effects these can have on successfully closing transactions. In a nutshell, many lenders will look at a recent purchase and see a sale within a short period of time as a red flag, questioning the ability of the property to have increased in value so quickly. When you offer cash and use private money to fund the purchase, there are no appraisals required, no recent loans issued to compare to, and therefore a bargain remains just what it should be, a bargain. Another lender issue concerns the amount borrowed. Many lenders disallow loans less than a certain amount and you may not be qualified for purchases above a certain amount. Both circumstances can limit you if you are using traditional lending sources or even hard money. The use of private lending removes these issues because the lender is more interested in the rate of return and the quality of the transaction than these other issues.

Benefit #7: Using private money preserves your credit and buying power.

Many investors have solid financial strength and can purchase properties through traditional lending channels. This is true up to a point. Once you purchase a certain number of properties, it can become increasingly difficult to purchase more, even if they all have good equity and are producing monthly positive cash flow. If you plan to purchase many properties, the use of private lenders becomes all the more critical so you don’t hit a wall with your own personal buying power. Another issue to consider on this theme is the impact of multiple purchases on your own personal credit. If you are buying 20 houses per year conventionally, you will have at least 20 credit inquiries, which will reduce your FICO score, even if the impact is brief. Private money requires no credit check and thus removes the proverbial restraints on your purchasing power.

Benefit #8: Using private money makes it easier to run your investment business through your entities.

You’ve probably heard that it is better to run your real estate investments through corporations, LLCs, or other legal entities. This is highly advisable and is all well and good in theory, until traditional lenders and even hard money lenders want to see credit backing a loan. Many lenders are hesitant to issue loans to entities, even if you sign personally as a guarantor on the loan. Since many entities are too new to have a credit rating to back them, most investors must take title to a property personally if they use a traditional funding source. Private money all but eliminates this obstacle and also improves the asset protection aspect of your business. Private money backing means you can offer cash for a property and therefore take title to it any way that you wish. This allows you to keep your investments out of your personal name, which makes more sense for both asset protection and for tax purposes. Additionally, use of an entity like an LLC to purchase a property is a way to secure your private lender’s contribution to the project .

Benefit #9: Private loans require less paperwork!

While the use of private lenders may require some paperwork to make everyone feel secure about the investment opportunity you are presenting, the quantity of paperwork is far less than if you went with another funding route. Cast your mind back to the last time you closed on a traditional mortgage or even a loan through a hard money lender. How many trees were required to produce the stack of paperwork that you had to go through and sign? A small forest, perhaps? These large volumes of paperwork are a necessary evil in the lending business, designed to protect all relevant parties, disclose any number of minute points of interest, etc. etc. The point is that traditional lenders are required by law to have you jump through these hoops. Private lending is not subject to these kinds of laws and restrictions so that means less paperwork for you and your prospective lenders!

Benefit #10: Securing private money gets you in that negotiating frame of mind.

I’ve heard the phrase many times, ‘You don’t get what you deserve, you get what you negotiate.’ This is particularly true in business and especially true when working with private lenders. Negotiation is something of a lost art to many American consumers, as we are socially conditioned to not bargain for things in the same fashion as in other cultures. Think about that. My point here is not to suggest that you are a poor negotiator. Quite the contrary. Negotiation, like any other tool in running a business, is one that can be developed and improved with a little bit of effort. What I’d like to suggest is that you take the time to develop the skills that I know you already possess but maybe just don’t use as often as you could be.

By: Matt Fagerness

College Funding Through Chase Bank Student Loans

admin — Sun, 18 Apr 2010 12:14:45 +0000

When you’re looking for ways to pay for college, you have to research various banks and lenders, and compare their private loan services and also look at what privately-funded federal loan conditions they offer versus direct federal loans from the Department of Education. Chase Bank student loans are available for every step in the higher education process, including federal and private loans.

Federal Stafford loans have the same basic standards whether they come from the Department of Education directly or through a bank, credit union, or other private lender. The maximum fixed interest rate is 6.8%, and you can defer payment until you finish school or drop under half time enrollment. Government subsidized Stafford loans are granted based on need; in this case the government pays the interest on your loan while you study. If your loan is not subsidized, if you defer payment until after finishing school the interest is capitalized.

Parents and graduate students can apply for PLUS loans, which do come with credit requirements but an eligible cosigner can be used. These loans cover education costs that are not covered by Stafford loans, which do not have a credit requirement, and any available student aid. Chase also offers federal consolidation loans; private and federal loans can be consolidated together.

Chase offers a competitive rate on federal loans compared to the Department of Education, cutting .1% off the normal fixed interest rate. This gives Stafford loans an interest rate of 6.7% compared to 6.8%, and PLUS loans have an interest rate of 8.4% compared to 8.5%. Chase offers full assistance in receiving federal loans and helps you with all the necessary paperwork without charging origination or default fees on their loans.

Any other expenses can be paid for with private student loans. With Chase Select loans, you can borrow as little as $500, if you need only a small amount to make up the difference in your cost of attendance and what your other loans and student aid cover, or as much as $40,000 if you need it.

The Chase Health Education Program is specifically designed for people studying to become professionals in the health industry. This is a long and expensive process, and Chase offers a group of loans targeted toward making this possible, from medical school to residency.

You can consult Chase and have your questions answered by phone or online, whichever is more convenient for you. Chase Bank student loans offer private loans and federal loans at lowered interest rates.

By: Adam Hefner

Personal Student Loans – Money In Your Pocket

admin — Sat, 03 Apr 2010 08:57:09 +0000

If you are a student and struggling to finance your studies, avail Personal Student Loans. Covering most of the expenses of a student with respect to his educational needs, student loans have established themselves as a very popular tool amongst students who aspire to study big.

Student loans offer students with enough financial support for them to complete their education. Needless to say, student loans aid in a lot of students completing their education which can only be beneficial to the society.

The factors impacting Personal Student Loans

Family Contribution -

Expect a larger amount on personal student loans to be sanctioned for you if your family contributes to a part of your education expenses. As an example, if the schooling fee for a course is $10,000 and your family contributes to the Cost of Attendance ($2000), you can expect a Personal Student Loan to be sanctioned for the amount of $8000.

Are you independent? -

Do not worry if you are independent of your family. A lot of loan granting institutions have some amendments for independent students as well. Typically, students classified as independent students have to meet strict eligibility criteria to avail of loans.

Rates of Interest -

Broadly, personal student loans are classified as Federal backed loans and non-federal backed loans. The loans offered as federal aids have less rate of interest than the ones offered by private lenders. Please note this very carefully, because if you are opting for a student loan offered by a private lender, be prepared to pay a higher rate of interest.

What should I consider before applying for Personal Student Loans?

Firstly, determine the need of a personal education loan for your studies. Pay for it if you can thus eliminating the need of paying a rate of interest on your student loans.

Secondly, you may be in need of a student loan but do you qualify for one? Close to 30% of loan applicants’ applications get rejected on count of missing the eligibility criteria or inadequate documentation. Apply for a student loan only when you meet these two.

Student loans do offer you the benefit of funding your studies especially when you do not have the finances. You could avail of these loans off federal education aids or through private lenders. Your responsibility does not end with availing the loan. Please note that you would have to diligently pay off the loan after the course duration is over.

By: Adam Hefner

Private Mortgage Investors – Who Are They?

admin — Fri, 26 Mar 2010 07:08:42 +0000

To understand who private mortgage investors are, it is first necessary to understand what a private mortgage is. A private mortgage is a legal agreement, secured by real property, between a borrower and a private lender that obligates the borrower to pay money to the holder of the mortgage note. A private mortgage therefore produces a regular stream of income to the investor with all the advantages and protections that a mortgage lien can provide.

Typically, private mortgage investors can charge more interest and points (fees) on a mortgage than a bank could because the risk of lending to people who aren’t eligible for normal mortgages is far greater. Quite often investors lend to people with less than perfect credit, but they may also lend to real estate investors irrespective of credit.

Traditionally, private mortgage investors were individuals who had sold their property and agreed to take back a promissory note and a mortgage from the buyer. The advantages to the seller were threefold. Firstly, by offering such terms, the homeowner was more likely to sell their property in a slow market and obtain the full asking price. Secondly, the seller would be a guaranteed a regular fixed income at a better rate than could be obtained from investing in a CD. Thirdly, if the buyer defaulted, then the owner would be entitled to foreclose on the property, just as if he or she were a bank. The benefit to the buyer of a privately funded mortgage loan is that they don’t have to worry about an extensive check on their credit or financial situation.

More recently, real estate investors have branched out into other areas of real estate financing. Some private investors specialize in lending money to professional real estate investors for the purchase and rehab of residential and commercial property. Others specialize in making mortgage loans to small real estate developers for the purchase of raw land and the initial construction finance. There are even some private investors who will lend to homeowners facing foreclosure or provide second mortgage financing, similar to a Home Equity Line of Credit.

Such has been the growth in private mortgage lending that there are now companies offering private mortgage investment services in the USA. Typically, these companies will either advertise individual mortgages for “purchase” by an investor, or syndicate a hard money loan amongst a group of private investors on their mailing list, or offer shares in a private mortgage investment fund.

Lastly, but by no means least, there are private investors who specialize in buying privately held mortgages at a discount, i.e. less than the principal amount outstanding. These investors provide an important role in creating liquidity in what would otherwise be an illiquid market. The main disadvantage of being a private mortgage holder is that you must wait for the loan to be repaid before you can access your capital. If an investor can’t wait that long, then they will need to find a way of selling the mortgage to a third party and this is where this last type of private investor comes into their own.

By: Peter Haynes