The Basics of Private Money Mortgages

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What is a Private Money Mortgage?

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Homebuyers traditionally seek a bank to finance the purchase of their new home or investment properties. Private Money Lenders take the place of the bank and close the loan in the same manner as a bank.  Private Money Lenders are held to the same laws that the banks are held to.  A title company is used for every transaction and at worst case scenario they have to use the same procedure for a foreclosure. 

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Private money mortgages (also called Hard Money Loans, Trust Deed investments, etc)

 

The Direct Lender typically analyzes the value of the property - Generally we don't order appraisals.  Purchase price establishes the value. 

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Loan Terms are negotiated based on the borrower & the property

 

Loan Terms

 

Investment property (non owner occupied) -

            70% LTV (Loan-to-Value) – some properties up to 80% LTV

            8-12% interest only payment

            12-60 month terms based on property and borrower

            No prepayment penalty

            No credit requirements  

        

Commercial Property –  (standard loan limit <$2mm)

            70% LTV (Loan-to-Value)

            10 - 12% interest only payments

            12-60 month terms based on property and borrower

            Can have a prepayment penalty if Lender Desires

            No Credit requirements

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Owner Occupied –

            70% LTV (Loan-to-Value)

            10-12% interest amortized for 30 year term with 5 or 7 year balloon

            No prepayment penalty

            No credit requirements