What to Know About Private Lending and Private Mortgage Lenders

You found your dream villa, and all you need now is financing. Read more about financing and mortgages when you click here. Sure, you are confident that you can pay for the mortgage no matter what the economy is. But when banks tell you “no thanks” when you apply for the loan, it’s time to consider private financing.

In the world where there’s constantly changing rules regarding mortgage financing, you need to find a lender that has favorable rules for its borrowers. Most of the banks have tightened their underwriting rules in recent years, and they have slowed down in looking for clients to finance because of unsteady economies.

A bank may not be interested in financing your villa due to a lot of factors. However, when they say no, it’s best to turn into independent organizations and individuals that offer private financing. The upside is that most private firms have more flexible guidelines and rules compared to traditional banks.

Introduction to Private-Enterprise Lending


This type of mortgage is sometimes coined as “Hard Money” loans where the terms are typically shorter. Generally, you can get duration from 6 to 24 months, depending on your agreement with the company. Some of the loans can be interest-only or amortizing payments where you pay a series of fixed fees in a month. You pay off the principal of the loan as a result.

Note that private financing can be more expensive than the typical banks, so a borrower’s goal should include getting out quickly. There should be an exit strategy that is clear for both parties. But the bottom line is that the full amount of the debt should be paid at the end of the term.

Is It the Best Situation For You?

When you are considering borrowing from independent firms, you need to see if this is the right deal for you. Not all transactions are made equal, and when you are refinancing your primary home, you need to consider several factors. See more about refinancing here: https://www.cnet.com/personal-finance/6-things-to-know-about-refinancing-right-now/. If you have an excellent income history, good credit standing, you didn’t experience any foreclosures in the past; then, you can try your luck with the bank.

If you want to make the mortgage shorter, then independent financers are the best way to go. You can think of the hard-money loan as one way to get your goals. You might be considering a more significant profit when you are planning to resell the villa, or you might need some funds today so that you can renovate your home and sell it to a higher price.

Most of the lending situations where people deal with private financers include the following:

  • Fix and Flip
  • Property Mortgage with Land
  • Construction Businesses
  • Buyer has Issues with Credit Standing
  • There’s a Quick Need to Act on a Good Deal
  • Taking Chances or Interim Deals

Some of the properties that you can get with an independent financer are the following: multi-family residence, vacant lots, agricultural lands, and commercial buildings. You can get an idea when you visit a private lending website and see which properties are available for you. Some companies can guide you with the right property and get you the best deals because they wanted to do business with you.

Are You Qualified?

Most of the companies can approve your application even if you don’t meet the criteria of banks. You may need commercial financing of $100,000 to $100 million, but you don’t have an established credit standing, or you have a bad one. You might need lenders for your second or third mortgage projects, and the first one is not yet fully paid.

You can go to your browser and search the internet on which one’s are the best companies out there. Another ideal option is to use the help of brokers that can help you find the best deals and rates that you can take advantage of. Most brokers are experienced in the field of independent lending, and they know the rules.

For you to be qualified, you just have to be concerned with the equity that you should pay upfront. Ideally, the higher the equity or the down payment on the property, the better the terms that will be offered. Most independent lenders are not too critical with your source of income and credit score.

As long as you can prove to them that you have the ability to meet the payment plan each month and repay the full amount at the end of the term, then you will have no problems with them.

Know Your Exit Strategy

You need to have an exit strategy for repayment. Know more about exit strategies in this link. This is important before you deal with the lenders as this gives you the peace of mind during the term of the loan. You can renovate your villa and sell it to a higher price. You can sell the property outright. You can sell another property to pay your existing loan. Telling these to the lenders will help convince them that you are the right person to deal with.

As many borrowers have experienced, repaying the loan through a wing and prayer won’t cut it out. The best way is to document and articulate all the specific steps that you will take so that you can repay them as soon as possible. The better you present your case, the more excellent your terms will be. Most of the lenders need to see the most current appraisal of the villa that you are trying to finance. You can contact a broker or a private company to know more about how the terms work.

1 Comment

  1. Great article thanks for sharing this kind of information.

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