Commercial Real Estate Loans: Bank vs. Private Lending
When embarking on td process of finding which type of mortgage loan is right for you, it is important to be well educated in what options are appropriate for you. When looking to acquire a mortgage loan, there are two categories of lenders. These two groups include banks and private lenders.
Banks and Conventional Lending
When borrowing a mortgage loan from a bank, it is most likely the case that you will find the lowest possible interest rates on the market. The traditional loan qualifications tat go into conventional lending lower’s the borrowers risk of default. Another benefit about bank loans are that they can be spread out over a long period of time. The downsides to seeking a conventional bank loan is that the borrower is faced with rigid down payment, income verification, and credit score requirements. In addition, banks will shy away from lending on no-conforming product types. Furthermore, the approval process is lengthy in time and can take as long as ninety days for a loan to be secured often involving high pre-payment penalty fees.
Private Lending and Hard Money
Some borrowers may find that the requirements that go into acquiring a bank loan may be too over bearing, so they will look for alternatives. Private lending allows borrowers more leeway in time and flexibility of the loan. The pros involved with private lending include no set lending requirements, funding can be set very quickly, the loan verification process takes much less time, and less money is spent on closing costs associated with the loan. Some downsides to private lending can be the higher interest rates, a high return on investment is usually expected, most private loans are short term, must provide proof of property’s income potential, and you must create a realistic exit strategy.
Contact the specialists at HML Investments for further information on private lending and hard money lending.