Great Private Lending Questions
If you are trying to take out a mortgage to buy that new house or simply needing to consolidate debt, but you’re having a hard time getting financing from a traditional lender; private lending is a great short term solution to get the financing.
Take a look at these great common private lending questions.
Answer: Interest rates vary depending on the the property type, property location, mortgage size, and whether the mortgage is in 1st or 2nd position. It’s best to get in touch so that a same day no-credit check assessment can be done to see if it is worth proceeding.
Answer: There are no upfront Brokerage and/or Lender fees on Residential private mortgages.
There are 3rd party costs such as appraisals & home inspections (if applicable). Borrower Independent Legal Fees will also apply, but this is generally paid at the time of final signing or from the new mortgage proceeds. Confirm with your chosen lawyer.
Commercial Mortgages will have an non-refundable “Working Fee” after a LOE (Letter of Engagement) has been signed and returned.
Answer: Much like the contract rate, the LTV will vary depending on the property type, property location, mortgage size, and whether the mortgage is in 1st or 2nd position. Get in touch so that we can quickly assess your request without a credit check.
Answer: Pre-payment penalties vary depending on the type of deal and the objective, but the common industry standard on closed mortgages is 3-months interest pre-payment, or a fixed percentage of original registered principal amount. Some provide open or partially open options.
Answer: Fees Vary depending on the loan size and specific of the loan application. For a Mortgage Loan of $350,000; the Combined Brokerage & Lender Fees generally start at 2%-4% of the gross mortgage ($7,000 -$14,000). These Fees are deducted from the mortgage and are not an upfront out of pocket expense. For Mortgage Loans under $200,000, the Combined Brokerage & Lender Fees are a higher percentage of the gross mortgage due to the smaller loan size.
- For a Mortgage Loan of $150,000, the Combined Fees generally start at 5% of the gross mortgage ($7,500).
- For a Mortgage Loan of $100,000, the Combined Fees generally start at 6.5% of the gross mortgage ($6,500).
- For a Mortgage Loan of $50,000, the Combined Fees generally start at 8% of the gross mortgage ($4,000).
The Lender Legal Fees and Closing Costs are also deducted from the mortgage, and determined by the Lawyers.
The Borrower Legal Fees are the responsibility of the Borrower. This is paid directly to chosen lawyer OR deducted from new mortgage funds.
The Borrower is also responsible for the appraisal costs. This is paid directly to the appraisal company.
Answer: As a property owner, it is your responsibility to put yourself in the best position possible to transition from private financing. When your maturity date is coming up, you will essentially have the following options:
- Renew – Subject to Lender Approval
- Refinance with a new Private lender – Subject to Approval
- Refinance with a non-Private Lender- Subject to Approval
- List the property for sale
Answer: The options when property is lacking are few, but there are options. If the property is in an urban center or direct surrounding area and there is 10%-15% equity, the options would be as follows:
- Provide some cash injection to meet a private lender’s criteria for the loan to value requirements.
- If other property is owned where there is adequate equity, a blanket mortgage can be considered.
- Sell your property. If the equity is less than 10%, the suggestion is to simply sell your home if you are in a foreclosure situation. (Refinance Situations)
- Enter in to Lease Buyback program. This is when an investor purchases the property from the property owner. A separate agreement is also prepared by both parties with the intention of the home being purchased back at a pre-determined date. (Refinance Situations)
Answer: YES. Looking for direct private lenders can be time consuming. If a direct private lender is found, it is possible that they may not be regulated by their provincial body. Mortgage Brokerages are regulated. We also have 4 avenues to provide funding; (1) Amansad Direct Lending Group, (2) MIC Partners, (3) Semi & Traditional Lenders, (4) Head Office Commercial Division.
Answer: The process is relatively fast provided we are receiving requested documents in a timely fashion. We can generally fund with our Amansad Direct Lending Group within 5 days after property valuation has been received.
Answer: A standard file will require is 2 pieces of Valid ID, a current mortgage statement, property tax assessment notice, an appraisal, and copy of home insurance policy. More documentation may be required depending on the facts of the file.
Answer: Turnaround time, brokerage firm pre-underwriting, and transfer of trust from our DLGN (Direct Lender Group Network)
Answer: Mortgage Payments with ADLG are interest only, but a single lump sum payment can be made towards the principal on each renewal without penalty. The cost difference over the course of a 12 month term is minimal.
- Assuming a 8% interest only on $100,000 would have a payment of $666.67 per month with a balance of $100,000 at the end of the term
- An 8% principal & interest with a 30 year amortization would have a payment of $724.71 per month with a balance of $$99,142.83 at the end of 12 months.
Because our private mortgages are meant to be transition mortgages, it makes more sense from an accounting perspective to keep the loan as simple as possible.
Note: We do have access to lender partners outside our network that provide principal and interest payments.
Answer: Payments are made monthly on the 1st or 15th of each month. Payments can also be partially prepaid, or fully prepaid with no payments during the term provided there is sufficient equity.
Answer: The process is easy, simple, and efficient and can all be done from the comfort of home or using a mobile device or tablet; with exception of when you sign the final mortgage documents with the lawyer.
- Complete Secure Compliance Application Package
- Provide Initial Documents
- Examples: IDs, Mortgage Balance/Payout Statement, Property Tax Assessment Notice, Property Balance Statement, etc. – Only provide documents when they are requested
- Secure Application & Documents Reviewed
- Approval Documents Prepared For Signing
- Remove Conditions
- Sign Mortgage Registration Documents With Lawyers – All Done!
No. However, the mortgage can be paid out in full anytime after a pre-determined period without penalty. This period generally ranges from 90 days to 180 days depending on the details of each file and the Lender Partner. Lump Sum Payments can be made towards the principal on offered renewals. In most cases, it is preferred to make additional payments to your other debts to lower your debt ratio so that you have an increased chance to refinance with a non-private traditional lender.
Note: On some exceptions, if the mortgage is with a lender partners outside our network, a partially open mortgage may be made available.
- Alberta, BC, and Ontario – 20% or greater
- 15% – 20% on a exception basis
- Saskatchewan, Manitoba – 25% or greater
- Alberta, BC, and Ontario – 30% or greater
- 25% – 30% on exception basis
- Saskatchewan, Manitoba – 35% or greater
The general loan minimum is $30,000; depending on the details of the loan request and total combined loan-to-value. In some cases, a smaller loan amount may be considered.
There is no maximum loan amount. We have a wide variety of Investor/Lender partners that are able to cater to jumbo sized loans. In some cases, the timing of the loan request determines the availability.
The general property value minimum is $150,000 depending on the details of the loan request. In some cases, lesser amount may be considered it the request makes sense and/or if there is other real estate collateral.
There is no maximum property value.
5 Steps To Success With Private Lending
If you’re going to obtain some private lending, you’re starting a relationship that will work a little differently than what you can expect from a bank or other traditional lender. Let’s take a look at some of the key differences, so you’ll know what you have in store.
Most people obtain private lending as a solution to get started on home ownership while they’re still repairing their credit. Private Lending is short term (often one to two years) and commonly allow for interest-only payments. Private lenders do not have to renew mortgages when the term expires, so you want to keep your options open by making your repayments on time.
If you change employers during the term of a private mortgage, there are no requirements mandating that you update that information. However if you do provide that update, you strengthen your relationship with the private lender, showing that you are serious about bettering your financial situation. Even if you haven’t notified your private lender of the change, that may be a requirement for extending or renewing the loan.
Improving Your Credit
If you took out a private mortgage while you intended to improve your credit, there are improvement counselors who can help you get that score up. The purpose of this is to help you qualify for a bank loan when the private lending mortgage term expires – which will save you tens of thousands of dollars over the amortization of the entire mortgage.
Obtaining New Credit
Try to avoid opening new lines of credit, and keep your credit inquiries to a minimum during the term of your private mortgage loan. These activities can affect your score adversely, which definitely will not help you when it’s time to shift from private lending to a traditional lender.
The Value of Communication
Remember – a private lender is entrusting you with a great deal of capital. The clearer your communication is, the stronger your relationship will be. Private lenders are much more willing to work with borrowers who are honest and upfront.
NEED MORTGAGE FINANCE, REFINANCING,
OR A SECURED ASSET LOAN?
✔ Same Day Response
✔ Fast, Efficient, & Friendly Service
✔ Private Mortgages are based primarily on Equity and the Property
✔ Bad Credit Mortgages are based primarily on Equity and the Property
✔ Traditional & Semi-Traditional Options also available
✔ Equity Based Secured Asset Loans
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