Private Mortgage: Do’s & Don’ts

Information about private money lenders and how the dynamics of lending & borrowing works is not available online. In this article, you will get the relevant knowledge about private home lenders in Melbourne, and what are the dos and don’ts to keep in mind.

To understand how the process works, and how private lenders in Sydney can help you.

This article will focus on what to do, and what not to do when dealing with private lenders.

Private lenders/ Private mortgage Melbourne works on the simple lending criteria:

1) Around 65%-75% of the value of the property.

2) no income or credit checks.

3) Money available in a short duration.

4) High-interest rates as compared to banks and other financial institutions.

Don’ts while taking the private mortgage:

1) Contact these lenders if they are ready to sanction more than 75% of the value of your property. For instance – You have the immovable asset of 100 000$ and you are getting 70-75000 already on your property, it is a complete waste of time to take the help of these lenders.

2) Pay an upfront fee. This does not apply to properties that are far away from the lenders or commercial properties. In almost all cases of residential properties, a private lender that asks for an upfront fee is merely a person and is not involved in the lending business directly. These lenders that require upfront fees more often are not the legit ones. Fees paid at closing are the norm, fees paid in the initial stage is a sign of fraud.

3) Make false statements and scenarios. Private lenders are not concerned about how you are caught up in the situation where you are. They look for security i.e property. They want to know your situation just to understand your basic character. If you are upfront and honest about your situation they will appreciate it. Private lenders often cut the loan amount when they find out that many of the statements you gave are not legit.

Dos while taking the private mortgage:

  • Check the options available. There are many private lenders present in the market, looking for the most honest, lowest fee private mortgage in Melbourne. Since your credit score is not in question, explore freely.
  • Take everything in writing, especially fees. Some lenders keep a lot of charges hidden. Ask them for every single fee they might charge in the process. Typical fees:

-Loan origination fee

-Notary fee

-Evaluation fee

  • Don’t ignore terms and conditions. These are flexible but it is very important to understand the basic rules and conditions. Normal private lending differs from place to place but normally it is for the short to medium term.

4) Ask about what happens in case of default. Some lenders will ask to pay early from the normal date. Meaning if you take the 1-year mortgage term, you will be accountable for the entire’s year of interest.

Borrowing from private lenders is quick and simple. Private lenders are extremely useful when you need funds immediately or in urgent of fast money after being rejected by the banks or structured financial institutions.

Looking for the most preferred private lenders in Sydney then your search ends here. Check

your new private lending institution. They are about more than just lending money. Archer Wealth is in the business of making dreams a reality. Want to know more? Get in touch at enquiries@archer-wealth.com or 02 8064 9608

Read More: Private home lenders Melbourne

What do private lenders seek when you apply for the loan?

Although every private mortgage lender in Sydney has different hard money loan requirements, the mentioned are few factors that are common in every private lending requirement. By the end of this article, you will be updated with a few tips for how you can put your best foot forward while applying for a private lending loan.Your Level of Commitment

Private money lenders like to know that you are just as serious in the property you are pursuing to investment—and how well planned you are. By putting the larger chunk of funds in the down payment, you can show private lenders Sydney that you are taking investment seriously.Does The Property Has the Capacity To Give Returns

Private lenders scrutinise the prospective property in and out; they’re looking for the cash-positive or profitable asset. For instance: If you are a fix and flip investor and convenience the lenders that you buy property in the cheapest deal possible, perform few or inexpensive repairs and make a decent profit by selling it, an institution for private lending Australia will be more inclined to provide you with the means to do so.

 Additionally, if you are not in the condition of selling the property, the lender will be better able to sell a good property for their money back quickly—versus letting a property without profit potential stay dead waiting for the right buyer.To show potential lenders that your property can be highly profitable, provide estimated values of homes and the property around the area and give them the other supporting facts that confirm it’s a sound investment. A fiscal representation of the property’s opportunity to increase in value may give some solidity to the buyers, which points to the final factor private lenders look at:Your Level of Risk

Officials of private lending in Sydney also look at your real estate investment background check and credibility. Do you maintain the trail of successfully restoring a home for sale or rent? Do you have experience in investing in property?If you are just beginning in the real estate investment, this does not mean you will not be trusted by the lenders. Give a larger chunk of money in down payment, or show the lender any detailed plans about the property. Keep it related to the budget and quotes for future renovations. Showing private lenders how much research you have done in the property and your plans demonstrate the profitable side of the property.Start the investing journey with Archer Wealth is your new private lending institution. We’re about more than just lending money. Archer Wealth is in the business of making dreams a reality.With our expanding pool of funds from sophisticated wholesale investors, we lend to our network of small to medium business borrowers. We’ve got your back, funding loans against real estate securities on both first and second mortgages.Our goal is to be Australia’s leading non-bank lender of choice, helping you wherever you are in your personal and professional journey.

WHAT ARE THE ADVANTAGES OF CHOOSING COMMERCIAL PRIVATE LENDERS?

Although conventional lending institutions have long been considered as the best for property mortgages, the increasingly fast-paced environment has opened new ways like private mortgage lenders Sydney to fund their real estate ventures. Obtaining financing from a private lender is useful to real estate investors who need urgent funds to close a deal. This helps to avoid the hassles of the long-drawn procedure. Private lending Sydney enables real estate investors to get funds way more quickly than from the organised sector.

Areal estate mortgage is one of the safest ways to borrow due to the fact that this type of loan represents a notable percentage of the mortgaged property value with a lower loan-to-value ratio than a regular mortgage lender. Moreover, the private sector has a fast procedure unlike a conventional institution, where so many parties have the say for loan approval. Read the following paragraphs to know why private lending in Australia is better:

  • Fast Procedure & Less Paperwork: Real estate financing via a private lender can potentially be done in just 5 days or less. The main reason is property being considered for financing rather than the individual’s credibility. If you compare the conventional mortgage lender, private lending is far more time effective to the borrower as the conventional mortgages take extensive details like the borrower’s history, credibility, and overall financial situation.
  • No Obligation To Disclose Past Financial Records: In some situations, it is important for the real estate investor to get a decision quickly to avoid the loss of a great deal in the cutthroat marketplace competition. Using a private lender avoids the necessity for personal financial information as the lender focuses on the value of the property being used for the mortgage. Obtaining funding from a conventional lending institution requires the borrower’s personal information to be as per the standards. If the information does not match the criteria, the loan decision is delayed and inevitably, the borrower does not get the funds.
  • No Credit and Debt Ratio: Organized mortgage lenders like banks focus on borrower credit and debt ratio along with the mortgaged property. In this instance, the borrower might fail to get credit or the type of property might not serve the interest of a conventional mortgage lender. This problem can be bridged by the private lender, as long as the property has a high-value evaluation and generates sufficient cash flow one can get the loan.
  • Bigger Loan Amount: Choosing commercial private lenders Sydney sometimes allows the borrower to get a bigger loan than one sanctioned through a typical mortgage lender as the private lender concentrates on the appraisal. The conventional mortgage lender normally puts the penalties if the borrower receives property at a discount to the appraisal. This means that the borrower must spend more of his/her own capital in the investment which would otherwise not be needed with a private lender.

If you have found these points convincing to opt for the commercial private lenders in Sydney then check the https://archer-wealth.com/. Archer Wealth is your private lender and your next sophisticated investment opportunity. With Archer Wealth, you can become a successful private lender, diversifying your income streams simply, and securely.

Mezzanine Debt: A New Way to Think About Construction Financing

Mezzanine Finance, Mezzanine Debt – or ‘Mezz Debt’ for brevity’s sake – is a term on the rise in the construction and development world. But it’s a term that a lot of us are unfamiliar with. So, let’s talk about it.What exactly is Mezz Debt? And how can it be a game-changer for your next construction project?The easiest way to think about Mezz Debt in relation to construction loans is as a ‘Capital Stack’, a term commonly used to describe the various levels of capital that join forces to fund a project. Personally, the idea of a Capital Stack makes me think of a juicy burger, so here goes nothing – my construction financing hamburger analogy, The Capital Stack.
Senior DebtFirst off, we have our burger bun – the Senior Debt. That’s the most substantial part of the Capital Stack, and it makes up much of the Loan to Value ratio of a project. If you’re securing this Senior Debt from a private lender, then it usually sits at between 67 and 75 per cent of the Total Development cost, according to HoldenCAPITAL Director, Dan Holden. The Senior Debt, the construction loan, is our bun, holding the Capital Stack burger together.What we have left in our Capital Stack are the patty and the toppings – this is the outstanding capital required to get the project off the ground. The Senior Debt provider, or the primary lender, won’t provide all the ingredients for the Capital Stack. They need to see that the borrower has enough ‘skin in the game’ to make the project viable. It doesn’t matter what the projected value of a construction project is, or how delicious that burger sounds on the menu, the Senior Debt provider just won’t bite if the borrower’s risk capital isn’t there.private lenders Sydney
Without our patty – be it Wagyu, fried chicken, or lentils masquerading as beef – all we really have is two soggy pieces of bread. And nobody wants that. So, what does the borrower do if they don’t have enough equity for the capital risk? What if there isn’t enough up-front cash for the deposit? Let’s put our Capital Stack into the perspective of a real-world example and see.Mezzanine DebtChris, one of Archer Private’s borrowers, was buying land in Adelaide for $1million, with an estimated $1.6 million value after subdivision. To undergo the project, Chris needed a loan to settle the purchase, and our private lender provided a loan of $700k. The Senior Debt was sorted at a 70% loan to value ratio (LVR).But, Chris had already spent $200k of his own funds to get through government red tape with the necessary approvals and permits, so he needed additional help to make up the remainder of the project costs. That’s where we look to Mezz Debt in our Capital Stack.If the borrower can’t put up all the up-front cash needed to get the primary loan over the line, Mezzanine Debt can be a terrific solution. With Mezz Debt in our Capital Stack, the Loan to Value ratio increases for borrowers like Chris, who now only need to contribute a small portion of their own money to fund the project.In this case, Archer Private’s Mezz Debt partner provided the additional $300k Chris needed on top of the primary lender’s $700k, amounting to the $1million required to purchase the land or 100% loan to value ratio (LVR).Borrowers’ EquityLooking back at our Capital Stack, we see that all the borrower needs to bring to the table are a few toppings. These can be as simple as some ketchup, or as substantial as a classic Aussie burger with the lot. It’s up to the borrower how much of their own equity they can and want to add to the Capital Stack, but most of the funding is covered by our Senior and Junior Debt – our construction loan and Mezz Debt.After Chris purchased the land with the $700k provided by the private lender’s construction loan and the $300k of Mezz Debt, all he needed to fund himself was the subdivision of the land. The end value was a fantastic $1.6 million after project completion. In this, we can see how the borrower leverages their potential return, while simultaneously minimizing the amount of capital they must dedicate to the transaction. According to finance writer Jordan Wathen, this maximizing and minimizing dichotomy is why Mezzanine Debt sits somewhere between traditional debt and equity. Chris paid the Mezz Debt back within 6 months, having sold enough blocks to cover the cost within the loan term.mortgage broker MelbourneIf you have a construction project on the horizon and want to minimise your dedicated capital, whilst at the same time upping the viability of your project, Mezz Debt can be a great solution. It’s worth sitting down and looking at how your own Capital Stack could add up to one delicious combination of a primary loan and Mezz Debt. If you need advice, feel free to contact us at Archer Wealth!

How to Get Your Working Capital, Working for You

Looking to boost your business’s working capital?

Working capital is a term we’re hearing a lot lately, especially after last year’s lockdowns ground many business’ cash flow to a halt. In 2021, there are incredible opportunities and incentives out there for new business and expanding business. So, what should you do if the banks are saying ‘no’? 

Private Lending can be a great solution to get your business the cash flow it needs. If business owners are looking for help to keep their business operational through the tough times, a working capital loan can help. They can also be a great solution if your business needs a cash injection to take advantage of opportunities in the good times.

There are several reasons your business might require additional working capital, and what it can be used for. For example: commercial private lenders Sydney

1. Seasonal changes to cash-flow

Seasonal differences in cash flow are normal in many industries and can impact the amount of additional working capital you might need to access outside of your business. For example, hospitality, which might require a cash injection to gear up for the high season, or, to keep the business operating during the low season.

2. To help you save money

There are times when having access to additional working capital and more cash upfront can actually help you save money long-term. For example, purchasing from a distributor at bulk or wholesale pricing in order to receive discounted pricing.

3. Cover funding obligations and expenses 

Additional working capital can help you to cover funding obligations to employees, government, or suppliers that may not be covered by your business’s current cash flow. This is especially relevant if your business does not take upfront payment from customers.

4. Launching a new product, service, or undertaking a project

There are times in every growing business when taking the next step means investing in your dreams. At those times, having access to additional working capital can make them a reality. For example, if you are undertaking renovations to your place of business, launching a new product or service, opening a new facility, or expanding your team.

The Benefits of a Private Money Loan

You might not think of Private Lending when you think of working capital loans, but at Archer Wealth, we love it. There are many benefits to securing this kind of loan, and why they can be a great solution!

1. Get the capital your business needs, exactly when you need it

Instead of drawn-out processes and long waits, securing a working capital loan with Archer Wealth will get your business the boost it needs, exactly when you need it. We know that time is of the essence with working capital. Because of this, we endeavour to secure you the funds you need for your business as efficiently as possible.

2. Our processes are simple – you won’t have to jump through complicated hoops

At Archer Wealth, accessing working capital is simple. All we need from you are your details, some background on the business, and an idea of what the funds will be used for. We don’t need cash flow forecasts or a detailed business plan. Plus, we welcome scenarios from all kinds of businesses – so dream big!

3. Get your business back on track, or level it up, without giving up control

Launching a new venture, taking your business to the next level, or maintaining operational efficiency shouldn’t mean giving up a part of what you have worked hard to build. With Archer Wealth, accessing additional capital for your business doesn’t come at the expense of control in your business.

Our 2021 success stories!  

  • For one of our clients in 2021, we helped refinance existing debt and financed a loan of $2.18 million with Archer Wealth’s own internal funds. That loan provided working capital for the client’s business to meet increased demand and support growth opportunities.
  • Another of our clients last year, a doctor who owns several properties worth upwards of $20 million, was told no by his bank for a working capital loan. With the help of Archer Wealth, he accessed a working capital loan which gave him the capital he needed to launch a new venture. He opened a new facility, providing more extensive services, and his business growth exploded!
  • A builder we worked with needed a cash injection into their business, and Archer Wealth internally funded a loan of $455,000. That loan provided working capital for the business to cover operating expenses. Thanks to Archer Wealth’s help in securing working capital, the client and his wife could free up their business’ cash resources to renovate their dream homebest mortgage broker Sydney

If you or your client needs to access capital to take things to the next level, or just to help with operational efficiency, get in touch. Don’t just let your business sit there and do nothing. Let us help get your working capital, working for you!

Private Lending: 10 Reasons to Consider It as an Investor

If you’re seeking an alternative to investing in the stock and bond markets, consider private lending in the property market. With care and diligence, you can earn greater returns on your investment while minimizing your risks as an investor. As a private lender, you will also have many opportunities available to you with low levels of responsibility. As banks implement stricter requirements for borrowers’ loan applications, private lenders are in high demand. If you have the funds to invest and want to improve your earnings as an investor, simplify the process of investing or diversify your portfolio, you may find that becoming a private lender is the smartest decision you’ve ever made.

Here are 10 benefits of becoming a private lender:

1. Secured loans

When lending on private mortgages, your money is secured by a registered mortgage against the borrower’s property. The borrower will then pay you interest until the loan is repaid. If you offer a 70% loan-to-value ratio (LVR) and you’re forced to foreclose on a non-performing loan, you could already have 30% equity built up in the property. A specialised solicitor will prepare and register all your mortgage security documents to ensure that your mortgage is fully secured to eliminate foreseeable risks. Plus, the borrower will be the one to pay the solicitors’ fees, not the investor.

2. Secure lending process

Having an attorney verify your paperwork (e.g. a Promissory Note and Lenders Agreement) or draft a contract offers complete protection. Reviewing the terms with the borrower will help you avoid costly legal complications. Furthermore, using a good escrow company and title company can guarantee your money will be handled professionally and legally, so you can rest assured that you will get paid.

3. Choose your own loan criteria

Your lending criteria can be more flexible than the banks. For example:

  • You can choose to lend money for either residential or commercial property.
  • If you prefer to lend money for residential property, you can specify whether you want a townhouse or a four-bedroom house, a single-family or a couple, or any other type of situation.
  • You can also choose whether the property is non-owner occupied, owner-occupied or a short-sale property.
  • You can choose how much money you want to loan, e.g. 60% or 80% LVR.
  • You can also determine the type of return you’d like on your money within a certain time period, e.g. 6% return on investment (ROI) within 3 months or 8-20% ROI within a year.
  • You can get a broker’s price opinion or a comparable appraisal by an appraiser so you don’t get sued and know that the investment you’re going into is actually worth what the borrower says it’s worth.
  • You can ask the borrower to hand in a proven credit track record showing that they can make payments and repay the loan.

To get the greatest returns, pick your criteria and stick to it.

4. Multiple ways of making money

As part of your loan criteria, you can also choose how much interest you’ll charge the borrower (e.g. 6-15%) and if it accrues monthly. Or you can charge points (which is the percentage charged monthly and at closing), e.g. charging 2 points for a $100,000 property means you make $2000 a month and when the loan closes.

5. Fixed yield returns

Investing in private money loans gives you fixed yield returns and pays off at maturity. For example, if you loan $100,000 at 8% interest per annum and require only interest payments, then you’ll earn $8,000 a year. If the borrower doesn’t default, the loan will be paid off at or before it reaches maturity and you’ll get back the original principal amount.

6. Short lending periods

With private money lending, you can recover your capital in a shorter period of time, which means that you can better protect yourself against different types of risk. Most private loan terms range from 9-12 months. Your loan criteria can also specify how many months you want the loan term to last for, e.g. short-term (3-6 months) or long-term (6-12 months).

7. Diversify your money and lower your risk

You can work with other private lenders to diversify your money and lower your risk as an investor. For example, you can invest in a pool that gathers funds from other lenders to create one entity for loaning money to borrowers. Or you can diversify your money by using multiple fractional loans with ten lenders, e.g. each lender lends $100,000 for a $1 million loan. The pool/fractional loan manager will handle loan decisions, and your money is diversified across different types of loans.

8. Earn higher returns with junior liens

A junior lien is a second mortgage. You can earn a higher rate of return by investing in a first mortgage and then buying a second mortgage or other more junior liens. If you choose to go down this path, another benefit is that there’s less initial cash outlay.

9. Spend less time managing your portfolio

If you don’t have enough time but you have enough money, you can work with a private lending company with a good track record to manage your money. If they invest in real estate, they’ll know how to best manage your portfolio and could probably guarantee you a 6-8% ROI. Working with a private lending company will also allow you to free up some of your time.

10. No costs or setup fees

You can apply to become a private lender at Archer Private, where we help facilitate lending transactions between lenders and borrowers.

At Archer Private we offer Sophisticated, Wholesale and Institutional clients the opportunity to use the Service of Archer Private to become Private Lenders and create income streams by funding mortgage-backed loans.

Clearly, there are many benefits to becoming a private lender. Investing in private money loans gives you better returns and is a secure process. It’s also low risk if you do all the right things and approach it the right way. As a sophisticated investor, it makes sense to become a private lender in today’s economy. Private money lending offers a safer way to generate income compared to other forms of investment, an ideal solution if you’re looking for an easy and cost-effective way to increase your wealth.

If you need any further information or help with your investment portfolio, get in touch!

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