Private Lending
Private lending describes a lending product that focuses on the strength of the property and equity available in the property/land rather than the traditional income qualification. The lender is not overly concerned about income on paper if there is enough equity in the property and the lender is confident that the borrower can meet the monthly debt payments. Typically, 75% to 80% loan to value is the maximum the lender will lend. The loan-to-value and interest rate will depend on the overall loan risk and or location of the property.
Private lending can be used for new construction, both for personal and commercial, second mortgages to pay down debt, equity take out, small renovations, bridge loans to cover a period, and unusual properties such as. Mechanic Garage or Gas Stations. The lending term is typically for 1 year with the plan to pay out the loan at the end. Because private lending Is more expensive than A or Alt-A lending, there needs to be a plan to pay out the loan after 1 year. For example, a construction private loan would typically be replaced with an A or Alt loan, once the construction is complete.
Private lending focuses on the property’s equity rather than the borrower’s income. If there’s enough equity and the lender is confident in the borrower’s ability to make payments, income documentation is less important.