If you intend to invest in real estate, the source of your funds is a significant game-changer. A mortgage loan is a critical financial commitment. A developer or a homeowner can either borrow money from a bank or approach a private lender.
Private lenders may not look the part because one may not be packaged like the traditional bank. Whereas both may help you secure the funds you need to buy a home, the merits and demerits of each, must be considered before making the decision.
Who is a private lender?
A private lender is a personal entity that gets money from investors or banks to lend it in a less formal setup. Money lenders are in the business of making lucrative profit margins by taking funds from private investors and lending them to deserving individuals.
Funds provided by a private investor are easy to procure because the rules are friendly to those closed out by the traditional banking systems.
And because the investors in private money lending businesses expect a decent return for their investments, the loan attracts a higher interest rate which is in turn loaded on the borrower.
Merits of Choosing Private Lender over banks
Banks are lending institutions governed by strict regulations. These make the lending requirements and process tedious. The guiding regulations dictate who can benefit from a mortgage and who gets closed out. The interest rate is also set and the repayment schedule is predetermined by the regulations.
Private lenders are less restricted by the federal state. As such, they’re flexible in the terms of leading their funds. They also access their clients and subjectively determine their ability to secure the loan.
A private money lender awards a loan using their custom-made criteria such as the credit history, income level, and loan to value ratio. Before signing for the funds you may read more from B lender rates Canada to get an idea of the interest you’ll pay.
A client with a low income may not qualify for a bank loan because their business is deemed as low-income. However, the same client can secure funds from a private lender who chooses to look at the potential of the business in question.
Private money lenders choose to scrutinize case by case and may overlook issues that would otherwise have been reason to deny you a loan from the bank.
How To Select A Real Estate Lender
When you need a mortgage in a short-term period, pricing between a bank and a private lender may not be a significant factor to consider. Private mortgage lenders for bad credit is ideal when you have a challenge with your loan payment history, or if you’ve got a limiting financial history.
If you need money urgently, a private money lender will meet your need faster than a loan. However, the loan and services attract a higher-interest rate than one from a bank.
Choose an ideal real estate investor to finance your mortgage. You’ll also save on time because, in a matter of days,the private lender will have deposited the funds in your account.
A private money lender is your best bet when you need money within short notice. You may pay higher Private mortgage rates than you’d with a bank but you end up saving time and money in the long run.