Introduction to Private Lending: Unlocking Short-Term Opportunities
Private mortgage lending in Canada has experienced tremendous growth over the past decade. More recently, private mortgages have increased by 72% between 2019 and 2021. The products offered by private lenders, like Keystone Capital Group, have proven to be excellent short-term solutions for both investors and borrowers. These loans, typically ranging from six to 12 months, provide a unique solution for those seeking quick access to capital without the constraints of traditional banking processes.
One defining feature of private lending is the focus on interest-only payments. Unlike traditional mortgages, where principal repayment is mandatory, private mortgages allow borrowers to pay only the interest during the loan term. This can significantly reduce the financial burden on the borrower, offering greater flexibility and increased monthly cash flow.
Property marketability stands as a cornerstone in private lending. The property offered as collateral is assessed to determine its current and future potential market value. This assessment ensures that the property can be sold swiftly in case of borrower default, protecting the lender's interests.
Equity plays a pivotal role in these transactions. Private lenders often require borrowers to have a certain level of equity in the property upfront, aligning their interests with the borrower's commitment to the project.
Exit strategies hold paramount importance in underwriting criteria. Brokers are required to outline a borrower’s clear plan to repay the loan, often through the sale of the property, refinancing or other means. This strategy provides assurance to the lender and mitigates potential risks.
In the world of private lending, understanding the short-term nature of loans, interest-only structures, property marketability, equity, and exit strategies is essential. These components collectively shape a secure lending environment that benefits all parties and fosters timely financial solutions.
