What’s the Difference Between a Hard Money Lender and a Private Lender?
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Posted On :
Jan-01-2012
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Article Word Count :
536
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When homebuyers are looking for an unconventional mortgage, they often confuse hard money lenders and private lenders, thinking that the two are one in the same. While the two are similar, they do actually have their differences and the one you choose will depend on the type of home loan you need.
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When homebuyers are looking for an unconventional mortgage, they often confuse hard money lenders and private lenders, thinking that the two are one in the same. While the two are similar, they do actually have their differences and the one you choose will depend on the type of home loan you need.
One of the major differences between hard money lenders and private lenders is in how they are licensed, or not licensed, to lend money. Hard money lenders aren’t considered to be a traditional lender such as a bank or a national lender. However, they are still considered to be a financial institution and as such, are required to operate under certain regulations and requirements. Private lenders on the other hand, are just that – private individuals or organizations that have no link to the financial world and are not considered to be a licensed financial institution but can and will provide secured loans for other private individuals. Private lenders in Canada are not held to any government codes for lending, nor do they need to hold a license to loan money.
Another one of the biggest differences between hard money lenders and private lenders is in the way their loans are structured. Hard money lenders work similarly to the banks when setting up their mortgages, meaning that they’ll have a few pre-determined products or packages for borrowers to choose from. Hard money lenders will have things like specific terms and interest rates outlined in these packages.
With a private lender in Canada however, there is much more flexibility when setting up the actual mortgage. There is much more room for negotiation and, as long as both parties agree to the terms outlined, pretty much anything is acceptable in a private mortgage. It’s this point alone that has borrowers generally more eager to work with private lenders than hard money lenders, because there’s more conversation involved between the lender and borrower, and both parties can work together to come up with terms that everybody is happy with.
But there is one more benefit that private lenders might hold over hard money lenders; and that is the fact that private mortgages are generally cheaper than hard money lenders. Of course, every situation is different and this isn’t always the case but it is what’s most commonly seen. These loans are often higher because hard money lenders obtain their funding through private lenders. In order to make profit back from that money, they need to charge higher interest rates and additional fees. When using a private lender however, a homebuyer can essentially cut out the middle man and therefore, cut out the extra costs.
But private lenders don’t completely have it all over hard money lenders. Private lenders in Canada can be particularly difficult to find, while hard money lenders are not. Because hard money lenders are in the business of loaning money, they advertise their services for doing so whereas private lenders do not. Homebuyers that are looking for an unconventional mortgage however can seek out the services of a mortgage broker to gain instant access to both hard money lenders and private lenders.
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Article Source :
http://www.articleseen.com/Article_What’s the Difference Between a Hard Money Lender and a Private Lender?_127093.aspx
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Author Resource :
Bryan J is the author of this article. For more information about mortgage in toronto and Mortgage broker in toronto please visit canadianmortgagesinc.ca
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Keywords :
hard money lender, Private lenders,
Category :
Finance
:
Real Estate
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