Private Lender vs. Banks – Who to Choose for Real Estate Investmentsupport
Selecting the right lender to finance an investment or commercial property is not always a straightforward decision. Both happen to come with advantages and disadvantages that are highly dependent on your personal situation.
Prior to determining which lender would be best suited for your circumstances, it is crucial to understand the differences between a bank mortgage versus private lending. In this blog, we go through the main points you need to know about private lenders and banks, including the pros and cons.
What is a Bank Lender?
Banks are considered the traditional lenders for real estate investment. People tend to use banks as they are perceived as trustworthy as they are strictly regulated.
Banks: Pros & Cons
- Historically speaking, banks offer lower interest rates.
- Although banks have more stringent loan qualification guidelines, approved borrowers may be less likely to default on repayments.
- Some banks may offer special benefits or rates to existing customers.
- Bank loans are normally long-term and can be spread out between 5 to 35 years.
- Banks have strict lending requirements, including a down payment, proof of stable income, and a decent credit score.
- Banks approval times are often cumbersome.
- Banks may try to cross-sell additional banking products to you.
- The loan process and services available may feel less personalised to you.
What is a Private Lender?
Private lenders source their own funding, then subsequently lend out these financial resources in the form of private mortgages and short-term loans. They are funded mainly by investors or other financial institutions, but are not regarded as a bank, credit union, or a building society.
Due to the flexibility provided by private lenders, there are many situations that make private lenders a good fit for financing an investment. You should consider using a private lender if you:
- Are looking to invest in real estate
- Only need a short-term loan using your property equity
- Are self-employed
- Are unable to be approved for a mortgage with a big bank for any reason
Private Lenders: Pros & Cons
- Private lenders have a tendency to be more flexible and responsive to your personal needs.
- They have the capacity to adapt loan recommendations to the investor’s exact financial situation and goals.
- Their approval times are immediate.
- Private lenders typically provide better, more personal customer service.
- Private lenders can have higher interest rates, therefore are more expensive.
- Services/products offered by private lenders are usually short-term.
- Research should be done as some private lenders may not be reliable or unlicensed.
- Borrowers have to build a realistic exit strategy.
Pacific 8 – Private Lender for Real Estate Investment
Established in 2015, Pacific 8 can offer these mortgage loan types: 1st registered, 2nd registered, Caveat loans, and Equity loans for all your real estate investment needs. We comply with and operate under an Australian Financial Service Licence.
If you are unable to take out a big bank loan and are a looking for a straightforward, streamlined process for a loan, then see what a private lender could do for you. They will assess your individual circumstances and customise a loan to your needs.
Ready for a more personalised loan experience? Book a consultation with the professionals at Pacific 8 today.
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