Private Lending increases in 2011

Private Lending update

The residential mortgage market continues to limit the availability of mortgage money and real estate investors are turning to private lending and hard money lenders to facilitate their needs.  Private Lending Groups has witnessed a strong resurgence of investors and borrowers requesting hard money loans and private rehab loans.

Private lending is sometimes defined as a loan that mortgage banks won’t do. However in this market even financially strong investors find the private lending quick approval and closing an advantage over banks and traditional lenders.

Private Lending loans range from borrowers with low FICO scores all the way up to complex commercial deals involving blanket or bridge financing.  The private lenders offering these funds are typically private individuals funds put together to fill the void for investment and commercial funding.

With the recent credit tightening of institutional financing and the folding up of over 320 sub prime and prime lending institutions, these types of hard money pools are gaining popularity with real estate investors and mortgage brokers.

Private lending as investments

These new private lending loans by wealthy investors or funds pay them an above average return on investment of approximately 10-12%.  They then loan the money out and keep the origination fees that they collect from the borrower.

In the past private lending and hard money loans carried a negative stigma.  This comes from the high fees (points) and high interest rates that some lenders charge.  Interest rates of twelve percent are a normal starting point for these private lending loans.  Origination fees are also typically ranging from 3-10 points (3-10 percent of the total loan amount borrowed.)

Interestingly enough for real estate investors, this type of loan is a wonderful thing.  Residential investment mortgage loans have nearly dried up while the number of pennies-on-the-dollar foreclosure homes has gone through the roof.  In many cases, real estate investors are happy to get financing so they can take advantage of record low real estate prices and purchase real estate investments.  With the advent of the private lending and hard money lenders comes relaxed guidelines and a more common sense approach to lending.

Private lending loans are typically at a maximum of 65% of the purchase price of a home or its appraised value and repairs.  For a private lender, this gives a tremendous cushion and a firm reassurance that a borrower will pay their monthly hard money mortgage payment.  After all, if they don’t pay, the private lender will foreclose and own the home at a roughly 35% discount.

There are few other qualifications to a hard money loan besides having “skin in the game” (having the 20-35% to put down on a purchase in a real estate investment)  A few private lenders require the borrower to have a FICO score of 620+ but other hard money lenders in the business still loan to any good project with a 65% LTV or lower.

If you are looking for a private lending loan on an investment property, a commercial refinance or a commercial transaction your first stop should be to visit our we site at www.PrivateLendingGroups.com.  They provide private lending money loans strictly based on LTV (Loan-to-Value Ratio.).

Private Lending Groups assists in the placement of funds for these loans as well as consults investors with diverse yield requirements from all over the United States.

If you are interested in investing in private lending loans or hard money mortgages get our FREE Report “The Best Way to Earn 8-10% Interest Secured by Real Estate!”  FREE Report Click Here

Posted in Private Lending.