Private mortgage financing in Vancouver helps self-employed people or those with less than perfect credit to buy a home. Those who buy real estate for quick turnaround–“flippers”–often say that short-term private mortgage financial is ideal. Because this kind of funding is less focused on the borrower’s credit than the likelihood of the project returning a better than market return, investors seeking a better than market return, such as money market or CD rates, loan money to borrowers. Rates are usually higher than published benchmark rates, or the rates banks give to their best customers.
Because private mortgages rates frequently offer more flexibility than traditional mortgages, it is possible to borrow money for a variety of real-estate related purposes. For example, first or second mortgages, mortgage/property tax payments, debt settlements, foreclosure restructures, construction or renovation loans. It is also possible to use this kind of financing for first/second mortgage income and commercial income producing properties of up to $10 million.
Some would-be home buyers are unable to qualify for typical mortgage because of less than ideal credit, debt levels, or self-employment status. For example, a self-employed consultant may earn money in larger increments but the income is not the steady stream sought by mortgage lenders. In general, it is more difficult to get a mortgage today than it was before the real estate bubble burst in 2007. Banks look for lenders with steady, reliable income streams and the proven willingness to repay debts.
Private mortgage financing is less focused on the individual borrower(s) and more about the home, apartment, office building, or commercial space’s representative Long-Term Value (LTV). The borrower with poor credit may be able to get a private mortgage if his or her desired real estate purchase represents a favorable transaction and future profits. For instance, the borrower identifies a home that is offered for quick sale and in need of reasonable repairs at a twenty-percent discount to other homes in the surrounding area.
In this way, the private mortgage loan is similar to hard asset financing used by commercial borrowers. Lenders in search of an attractive income stream over a known period of time make these loans to borrowers. The lender typically evaluates the loan differently than a bank because the lender does not possess mortgage-servicing capabilities or the desire to accumulate a portfolio of real estate if the borrower does not pay. The lender is compensated for a higher degree of assumed risk by the borrower. A mortgage broker or intermediary is often involved in these transactions. It is often challenging for an individual home buyer to identify reputable private mortgage financing providers because most private lenders do not advertise access to this funding.
The long-term trend for real estate price appreciation is generally considered positive. Home buyers in search of a “handyman’s special” or fixer-upper seek a home that is structurally sound but in need of updating and superficial repairs. Depending upon the current owner’s cost basis and motivation, it is possible to find and purchase a property at less than market price.
A home in need of many renovations is unlikely to qualify for a traditional bank mortgage loan even if the borrower’s credit is excellent. A private mortgage lender is often the solution for the buyer. A private loan provides timely funds for the renovation and affords the purchaser the ability to accomplish the dream of home ownership.
In comparison, real estate flippers usually maintain a short renovation-to-resale timeline. Their goal is to make necessary renovations to the property and resell it over a period of weeks or months. If the owners plan to submit to traditional commercial refinance vehicles within several months, private mortgage loans are often used to accomplish the necessary renovations first.