At an interest rate between 8 - 16%, these don't even seem like they are B lenders to me, and that makes me think -- why would someone ever want to borrow from them to purchase property? Even if the loan is for a year, it seems totally unsustainable to me.
Personally, I'm always a little surprised that people would go to these lenders
Quote:
Originally Posted by Energy
We act for a lot of private lenders and I'm actually amazed at how they make their money. Some person wants to borrow $500k and a mortgage broker connects them with my client. The borrower may already have a first mortgage in place from a major bank. My client will lend the $500k in exchange for a second mortgage on the borrower's property. The term is normally shorter, like 1-2 years or even a few months sometimes and the interest rate is between 8-16% per annum. Only interest is paid every month. After the term my client is repaid the principal amount of the loan. All broker fees and legal fees are also paid by the borrower. The borrower will also pay to the lender a lenders fee which is a small % of the loan amount say 1%.
I haven't seen any loan that has gone into default either and if it did we can foreclose on the property.
I'd say that an almost guaranteed rate of return of 8-16% on an investment is pretty good. Their money just keeps growing and growing.
|