Once you have decided to buy a commercial real estate property, the hard decision is to choose which financial options you would go for real estate. According to Supermoney.com, about 36% of people who bought a home in 2021 paid for it completely with cash. Private money lenders for real estate loans may be a favorite option for you. Despite the availability of several private money lenders in the market, you have to know which one has the best lending deals. Remember, not every private money lender will give you all the money you need or be soft when you have defaulted on their deadlines. You have to be very careful who you lend from regardless of how good the deal looks to you. So, below are three factors you need to consider when choosing the right private money lenders for real estate.
The Primary Terms of Your Loan
Before you can accept a loan, regardless of how desperate you are to get your first home, always review the primary terms offered. Check what the rates are offered by several other lenders. The value of your property to purchase and the period at which you are to pay for the loan. There is also the loan to value, whereby the ratio between your loan and the property value you want to purchase. The higher the LTV, the better the offer from your private lender.
Your Pre-payment Penalty Rates
Not every private money lender for real estate is going to be open about their prepayment penalty rates. You have to ask about it before receiving the cash to avoid future problems or paying high loan penalties. Also, make a comparison between private lenders to get a fair deal and option. One big mistake people make is failing to check these penalties.
Information on Non-Resource Financing
This is when a lender and a borrower agree to sign a memorandum of understanding that they will use either a loan principal amount repayment or an interest amount repayment. Therefore, the lender is only allowed to recover their money through selling or confiscating the mortgage and no other property in case of failure to repay the loan. In this case, non-recourse financing remains a better option for you. However, this is not how it goes, since most private lenders will seek to get the right to take even your private property to recover their money.
Let’s hope these factors help you in choosing the right private money lenders for real estate. It would not be fair to get a loan from an unreliable lender to purchase your mortgage only to sell it to repay a loan. If you need further assistance on loan details, get in touch for a more comprehensive consultation.