6 Tips on Private Lender Real Estate Financing Versus a Conventional Mortgage
The economic situation in today’s world is totally uncertain and unpredictable. Financing a real estate venture through a private lender is considered a viable alternative. Private lending is becoming the preferred alternative for financing real estate. Let us look in detail about 6 tips on private lender real estate financing versus a conventional mortgage.
The following are the tips on private lender real estate financing versus a conventional mortgage;
1. Allows for a larger loan amount
Choosing to finance real estate through a private lender sometimes allows the borrower to receive a larger loan than one received through a conventional mortgage lender because the private lender focuses on the appraisal. The conventional mortgage lender often poses penalties if the borrower acquires property at a discount to the appraisal.
2. Secure way to borrow
A real estate mortgage through a private lender is a very secure way to borrow due to the fact that this type of loan represents a significant percentage of the appraised property value with a lower loan-to-value ratio than a conventional mortgage lender. Additionally, the private lender is able to make a quick decision that would otherwise take longer with a conventional institution, where it must be approved by a group of loan decision-makers.
3. Requires no current financial information
In some instances, it is necessary for the real estate investor to receive a decision immediately to avoid the loss of a potentially lucrative deal in a competitive marketplace. Using a private lender circumvents the requirement for personal financial information because the lender focuses on the value of the property being used for collateral. Obtaining funding from a conventional lending institution requires the borrower’s personal information to be current. If the information is not current, the loan decision is delayed and inevitably, the borrower loses the deal.
4. Fast completion of financing
The financing via a private lender can potentially be completed within a week. The type of property being considered for financing is the primary factor in the decision instead of personal information pertaining to the borrower. When compared to a conventional mortgage lender, the private lending criterion is more advantageous to the borrower because conventional mortgages require more details like the borrower’s history, debt ratio, and overall financial situation.
5. Has no credit and debt ratio
The conventional mortgage lenders focus on borrower credit and debt ratio as well as the type of property being financed. In this instance, the borrower may not be able to obtain credit or the type of property chosen does not represent the interests of the conventional mortgage lender. In this case, the private lender is the solution for the borrower as long as the property has a high-value appraisal and produces sufficient cash flow to satisfy the loan.
6. Quick and straightforward
Getting financing from a private lender is beneficial to real estate investors who seek immediate financing to close a deal. Therefore Private lending enables real estate investors to potentially close a deal much faster without having to endure the red tape of a conventional mortgage lender.