Private mortgage loans can provide professional real estate investors with quick and more flexible access to funding for investment properties. While typical private mortgage loans often come with higher interest rates, these loans are often easier to qualify for, require less paperwork and are based on the value of the property versus the borrower’s credit. See the following article from REIClub for more on this.

privatelending
You've spent the last 4 months trying to get your client a mortgage on his investment property. You gathered all his personal, business and real estate financial information, for not only the property you're trying to finance but for all his business and property interests. You've done projections, forecasts and read through 200 page appraisals. You've put together a loan package, sent it to numerous commercial mortgage lenders, only to find out each one needed the same information filled out on their particular unique forms. So you've spent dozens of hours more transferring the same information to tens of different applications. You've spent numerous hours obtaining "additional information" for each potential interested lender. And now you've exhausted all possible institutional mortgage sources and still no loan.

Sound familiar? Perhaps you're new to the commercial mortgage field. You have been successful originating residential loans, took the NAMB Commercial Mortgage course and decided to expand your practice to include commercial and investment property mortgages. Or maybe you're already a commercial mortgage broker, successful in obtaining financing for some clients, but feel you just spin your wheels trying to obtain financing for others. The key to spending your time more productively is to understand when institutional commercial mortgage money is NOT available for your client. The key to earning a commission from these same clients is to understand what type of financing may be available for this same client.

Private mortgage loans are loans secured by real estate made by a private lender instead of a bank, lending institution or government agency. Private mortgage loans are short-term (ranging from six months to three years) hard money or asset based loans made to the professional real estate investor for the purchase, rehabilitation or equity cash out of real property. This means that the decision to lend is based on the equity and value of the property being put up as collateral, not on the borrowers credit. The security for the loan is enhanced because the loan represents a maximum of 65% - 70% of the appraised value of the income producing property. On non-income producing property (raw land, lots, construction money) a maximum of 55% loan to value is lent. Investors can expect to pay interest rates of 12% to 14% on first liens and 16% to 18% on second liens in this current low interest rate environment. Historically first lien yield of six points over prime has been obtainable.

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