IN PART 1 of this article, you read about some of the reasons you might want to use a non-conventional lender. And about two types of non-conventional lenders that could be useful to you — Mortgage Funds and Solicitor’s Funds.
If you missed it, you can find the original article here.
Anyway, you read on now … to learn about three more non-conventional lenders.
These lenders raise money through large lines of credit from major banks and on-lend to you and other borrowers at a margin.
They can be very useful for commercial property investors, as the rates and fees are not much higher than banks.
Fortunately, they are generally a lot more relaxed about requirements such as:
- Annual reviews
- Interest only periods
- Longer loan terms
- Guarantees from related companies
The low interest rates available on bank deposits and a tightening of banking regulations on lending since the GFC means that lending out money on property transactions is a popular way to secure higher yields.
If you are looking for less conventional type loans, finding an individual money lender may be the best option for you.
This type of lending may be well suited for the following transactions:
- Completion of property developments
- Second mortgages
- Mezzanine loans for property development
- Short term business loans
If you want to lend from a private investor, often mortgage brokers, accountants and financial advisers are able organise a meeting with one of their contacts.
Just be aware that rates and fees are often a lot higher than what you may be used to. And you should only go down this track if you are sure that you are not eligible for any other traditional funding solutions.
Due to responsible lending legislation — this type of funding is generally not available for loans for residential property purchases or refinances to individuals.
Short Term Lenders
A number of firms throughout the country lend on a short term basis … with funds available in as little as 24 hours.
These products have a place in the market for borrowers needing urgent settlements or funds to get them out of a difficult situation.
You should approach these lenders with extreme caution.
The fees and rates are usually very high, often several percent per month. And a number of firms use questionable practices. If you must use these lenders, try to avoid high upfront fees and do plenty of due diligence.
Once again, these lenders generally do not lend for residential property purchase or provide refinancing to individuals.
BOTTOM LINE: This article completes the two-part series that summarises the various non-bank funding options that operate in Australia.
Make sure you speak to a specialist, if you are seeking non-conventional funding.
They will help you find financing that suits your needs and avoid the traps associated with using lenders outside the traditional banking system.