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How Do Private Mortgage (Hard Money) Lenders Differ?

You may think that all private mortgage (hard money) lenders are the same, but they as similar as comparing one restaurant to another.  

There are two primary factors that make private mortgage lenders different from one another.  The first difference is the types of loans they arrange and the second is whether they are a direct lender or a mortgage broker.  Some private lenders only lend on residential properties, where some lend on all types of properties, including apartments, office buildings, land, mixed-use, and other property types.  

The secondary reasons that differentiate private mortgage lenders are their funding and capital capabilities.   Are they a direct lender or a mortgage broker?   It is important to know where the actual funds are coming from and can the lender or broker fulfill their loan commitment and actually fund the loan.     Some private mortgage lenders have their own funds and or may manage a mortgage pool.  Other private lenders may only be brokers, which is not always bad, and will need to locate the lending source outside their office and internal capital resources.   

GW Private Capital arranges every loan with its own capital or with the funds from friends, family, and small boutique mortgage funds.

Another way in which private mortgage lenders are different is the minimum loan amounts they arrange.  Most private mortgage lenders have a minimum loan size, this may be $100,000 or it may be $250,000, this is set by each individual lender.   Every private mortgage lender usually has a maximum loan that they will arrange, $500,000 or $10,000,000.  Each lender will establish their own maximum limits.  

GW Private Capital, Inc. arranges loans as small as $30,000.  

Private mortgage lenders also differ in the lien position that they arrange.  Some only arrange 1st position mortgages, where some may arrange both 1st and 2nd mortgages.  

GW Private Capital Inc. arranges 1st and 2nd mortgages and in rare instances will also arrange 3rd position loans.

Not all private mortgage lenders arrange loans in all 50 US States, most lend only in one state or just a few.  Furthermore, many private lenders only lend in regions within a particular state. Some lenders may be licensed to lend in the entire State of California but may only lend in the Southern or Northern areas within the state.  Most private mortgage lenders will also only lend in certain counties and cities that they are comfortable lending within.  The majority of private lenders will only lend in major cities with higher populations and may stay out of areas that are in outlier areas, or rural communities.

Private mortgage lenders also differ based on the types of loans they arrange, consumer versus non-consumer loans.    Most private mortgage lenders will only arrange loans where the funds are for business or investment purposes.  Also, most private mortgage lenders will not lend on properties that are owner-occupied or where the purpose of the funds are being used for a consumer purpose.  A consumer purpose is where the funds will be used for their personal use, such as to buy a home to be their primary dwelling.  A consumer purpose could also be paying a credit card, paying an automobile loan, paying a student loan or to paying for a wedding.   

The reason that most private mortgage lenders do not arrange consumer purpose loans is because of the legal compliance requirements for arranging consumer loans is much more stringent and tightly regulated than for arranging non-consumer purpose loans.  All private mortgage lenders who wish to arrange consumer purpose loans are required to have additional licenses and comply with all state and federal lending laws and guidelines.     Most private lenders do not want to have to meet these requirements and subject themselves to the possibility of being penalized for violating these laws.  

After the recent mortgage and real estate market crash of 2009, all states and federal agencies created new and strict lending laws that were designed to protect consumers.  With the passing of these laws, they restricted the supply of private mortgages.  The regulations and laws that private mortgage lenders must now comply with are arduous and difficult.  Most private mortgage lenders have decided to not lend on owner-occupied properties and do not arrange consumer loans.  Most will only arrange loans for rentals and non-owner occupied and commercial properties.    

GW Private Capital, Inc does arrange consumer purpose loans, however, on a case-by-case basis.  We will arrange loans on owner-occupied properties where the purpose of the loan proceeds will be used for business, investment or a non-consumer purpose.  

Most private mortgage lenders will arrange purchase loans and refinances.  What makes each private mortgage lender different is their own unique lending guidelines and requirements.  Some private lenders may require a minimum borrower credit score and some may not care if a borrower has poor credit.  One private mortgage lender may be an expert at arranging loans for fix and flip investments, and will only require a small down payment from the buyer, investor.  Understanding these important differences is what make each private mortgage lender unique and different from the next.  

To learn more about Private Hard Money Loans, please contact Jay Green at
(714) 747-1912 or email him at jayg@gwprivatecapitalinc.com

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Things to Know before Taking a Hard Money Loan

private money lenders

Getting a bank loan today has become hard, especially if you have bad credit. Yes, you might get the loan, but the deal will not be as good. At the end of the day, you might find that you owe more in high-interest rates or have to pay a higher premium. This might cause you to pay almost double the amount of money you borrowed in the first place, especially if you took out a mortgage. Meanwhile, business loans come with loads of pressure and often have a higher price tag.

It’s no surprise that fewer people today are taking business loans out from banks. This isn’t surprising given that some studies have shown that American households owed $9.12 trillion in mortgage debt as of 2019. According to a Federal Reserve Survey, in 2017, only 40% of American business owners applied for a loan, down by almost 5% from the year before. Hard money loans from private money lenders have become an increasingly viable option if you need quick and cash.

What is a hard money loan?

So, what exactly is a private money loan or hard money loan? A hard money loan is a loan given by a private investor or a private company that is often secured by a property. Instead of looking at your credit score, private money lenders look at the value of your property or business. There is no standard interest rate for a private money loan. The interest rates depend on the hard money lender that you choose. Private loans are quick and are given for a short period of time, typically ranging between 6-24 months. This period can be extended depending on the agreement between you and the lender.

What types of properties do private money lenders accept?

Some private money lenders for real estate are selective about the type of property you can put down as collateral. Some prefer residential properties while some are more open-minded. Others might even be willing to accept a motorcycle as collateral. The best method is to be direct and ask the kind of property the lender prefers.

Are private loans the best choice?

Only take a private loan if you are sure you are going to pay it back quickly. Dragging it over time might end up costing more depending on the amount you took and the interest rates. Hard money loans are typical among property flippers who work within a short time frame. This is what makes private money lenders for real estate so popular.

If you choose to borrow from a hard money lender, put the following factors into consideration.

How to choose a great hard money lender

  • Experience and credibility: Make sure that the private money lender of your choice has a good track record and years of experience.
  • Payment flexibility: Although private loans are for a short time, make sure that you can get a proper payment plan.
  • Interest rates: What the loan will do for you should be worth the interest. Avoid suffering a loss by carefully analyzing your finances and planning how you will use them. Also, do your research and get a money lender with manageable interest rates.

When you’re looking for the best private money lenders around, rely on the experience of GW Private Capital to transform your life.