In our last blogs, we’ve looked at A lenders and B or alternative lenders. What if neither of those lending options is right for you? Fear not as this is where C or private lenders come in!
C lenders are a subset of alternative lending that encompasses institutions like Mortgage Investment Corporations (MICs), wealthy individuals with lending capital, or even groups of people who come together for a syndicated mortgage. The advantage of this lending pool is that the lender is way more concerned about the property than the individual borrower.
Lenders will typically take on someone who’s seen as a “higher risk” by the A and B lenders since they know there is financial security in a solid property. This security allows for more borrowing opportunities for people with little or bruised credit. The disadvantage is that you deal with higher interest rates and lending fees. People borrowing in this space can expect to pay interest rates of 10-18% and lender fees of 2-4%.
Myth: Private lenders will take any deal as long as they get paid.
Fact: Not true. Private lenders, like any other type of lender, will take calculated risks but are not in the business of wanting their customers to fail. Their goal is to help someone in a certain situation for a short time and move them on to a different lending channel after that.
Maybe you find yourself in a situation where you’ve purchased a new home with the expectation that your existing home would have sold before closing on your new place. Amidst the real estate market balancing out, you haven’t gotten that anticipated quick sale and that closing date is coming up. In short, you don’t have the down payment needed for the new home and your bank won’t approve you for two mortgages. What do you do?
It may sound like a tough situation but this isn’t the first time something like this has happened! We’ve used private lenders in these types of situations to basically buy the new house and do a blanket mortgage against the existing home while it’s still for sale. A bank won’t provide a mortgage on a home that‘s going to sell since it doesn’t provide them with much revenue. Whereas a private lender understands that they will have security across two properties.
With that blanket and feeling safe with the mortgage on the new home, a deal that couldn’t work through the traditional (or most alternative) pathways can now be found. These private lender opportunities will always be more expensive but they will also entertain deals that other lenders simply won’t. In some cases, if the numbers work out, we can even negotiate including some payments so you’re not stuck paying for two homes while waiting for your home to sell!
There are lots of lending options out there. Contact the Kyle Miller Mortgage Agent team so we can discuss your situation and provide the best solution for you!
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