By Tracy Luciani Price
Our mortgage business does mostly prime business but we still do a lot of private deals. And we are always in need of new people who would like to make the jump into private mortgages. Most of our private lenders came to us because they sold their farm or quota or their business or they got a large inheritance or they had a lot of money in the bank getting pretty much zip in returns. Some of them borrowed privately and then became lenders. We have a personal relationship with our private lenders as we tell them about the stories of why a homeowner would need some money. These are local people who find themselves in a bit of a jackpot and unfortunately at this time, institutional money is not an option. Most of our private lenders are from within a 100 mile radius of the area so they are familiar with the market here.
A homeowner comes to us and if we figure out that a private mortgage is their best solution, we will discuss the situation with the private lender. We order an appraisal, pull credit bureauis, get job letters and pay stubs all the regular information we gather for a regular mortgage. We make sure the clients can afford the new mortgage. Our goal is to have an exit plan so the clients can eventually get back into prime mortgage. A typical private mortgage has a 1 year term which is renewed at the discretion of the lender. The borrower and lender both have their own lawyer and the borrower provides a PAD form or postdated cheques to the private lender. It’s all very civilized.
The returns on investment on a 1st mortgage can range from 6 to 10 percent and on 2nd mortgages 10 to 15%. Our investors are not interested in taking properties by power of sale or foreclosure. We are not interested in that kind of lending.
Private lending is a win-win for both the lender and the borrower. The lender has money and the borrower needs money. And it’s a hands on investment rather than relying on someone to invest in something you have no clue about. Your money is invested on a property you can see, visit or driveby. Our motto is to never lend money to people, we wouldn’t be prepared to lend ourselves. And over the past 15 years, we have helped a lot of homeowners out of very difficult circumstances by the private lending means.
Right now, our need for private money is greater than in the past because we are helping a lot of farmers with the addition of our farm mortgage broker Cory Wozniak who hears from many farmers who cannot be financed through the banks. If you are interested in discussing how to lend privately please give us a call and we’ll have a chat about whether it might be something you would like to do.