Don’t miss out on a real estate opportunity
Ryan La Haye
May 13, 2020
You do not have to be in difficulty, or have poor credit history to make use of the flexibility a private lender can provide. You can be a very credit worthy client and still need the flexibility that a private lender offers in order to move quickly, where a bank would be more reluctant to offer a financing solution.
Let’s say you just found your dream home but do not want to sell your existing one too quickly at a fire-sale price. Your situation may be that you have limited liquidity in your bank account, however you may have a lot of equity in your house that you want to sell. No bank will give you the bridge financing you need for 60, 90 or 120 days. “You cannot make an offer to purchase conditional to selling your house in a few months, not in this market!” says Peter Galli, CEO of PENTOR Finance. “No one will take you seriously with that kind of offer. Sellers will want to know that you are ‘financeable’ when you make your offer and will give you no more than 10 days to prove it.”
But here is the creative solution: a private lender can refinance your existing property, so you can take advantage of using the equity that you have as cash down for the new property—and they can finance the new property as well. “Working together with your mortgage broker, the private lender takes both properties as a guarantee and underwrites one mortgage for the time you think you need—let’s say 6 months—to sell your existing home at a fair price”, says Galli.
This kind of nimble lending also works wonders for investment properties. Let’s say you have a golden opportunity to acquire a property at a bargain price and make a nice profit by refreshing and reselling it. You need to seize the moment, however, banks are typically reluctant to go along. They may not be interested in financing a “flip”, due to the short term in nature that the mortgage will be outstanding with the bank. To the banks, your deal will be “administratively cumbersome” and not profitable .
These are simply two instances whereby using a private lender will allow you to take advantage of the equity in order to seize the opportunity at hand.
“The private lender can come in and tailor an ‘out-of-the-bank’ solution with a flexible, short-term mortgage solution, says Galli. A private lender is much more likely to accept multiple properties as a guarantee or to grant bridge financing on a property you plan on reselling. While the interest rate may be higher than that of a bank, the opportunity cost of not doing the transaction could be much higher.
Ryan La Haye
rlahaye@planipret.com
450-629-3101
Let’s say you just found your dream home but do not want to sell your existing one too quickly at a fire-sale price. Your situation may be that you have limited liquidity in your bank account, however you may have a lot of equity in your house that you want to sell. No bank will give you the bridge financing you need for 60, 90 or 120 days. “You cannot make an offer to purchase conditional to selling your house in a few months, not in this market!” says Peter Galli, CEO of PENTOR Finance. “No one will take you seriously with that kind of offer. Sellers will want to know that you are ‘financeable’ when you make your offer and will give you no more than 10 days to prove it.”
But here is the creative solution: a private lender can refinance your existing property, so you can take advantage of using the equity that you have as cash down for the new property—and they can finance the new property as well. “Working together with your mortgage broker, the private lender takes both properties as a guarantee and underwrites one mortgage for the time you think you need—let’s say 6 months—to sell your existing home at a fair price”, says Galli.
This kind of nimble lending also works wonders for investment properties. Let’s say you have a golden opportunity to acquire a property at a bargain price and make a nice profit by refreshing and reselling it. You need to seize the moment, however, banks are typically reluctant to go along. They may not be interested in financing a “flip”, due to the short term in nature that the mortgage will be outstanding with the bank. To the banks, your deal will be “administratively cumbersome” and not profitable .
These are simply two instances whereby using a private lender will allow you to take advantage of the equity in order to seize the opportunity at hand.
“The private lender can come in and tailor an ‘out-of-the-bank’ solution with a flexible, short-term mortgage solution, says Galli. A private lender is much more likely to accept multiple properties as a guarantee or to grant bridge financing on a property you plan on reselling. While the interest rate may be higher than that of a bank, the opportunity cost of not doing the transaction could be much higher.
Ryan La Haye
rlahaye@planipret.com
450-629-3101
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