Develop Property
Development Funding
For property developers, private lending is a valuable tool for funding construction projects that may not meet traditional bank criteria. Development funding typically covers:
- Land Acquisition: Purchasing land for future development
- Construction Finance: Funding the build phase with progressive drawdowns based on construction milestones
- Mezzanine Finance: Filling the gap between senior bank debt and your equity contribution (higher risk but flexible for developers)
Types of Security in Private Lending
Private lenders offer more flexibility than traditional lenders when it comes to the types of security they accept. The security type impacts the lender’s risk level and can affect the loan terms, such as interest rates and repayment flexibility.
First Mortgage
A first mortgage is the primary loan secured against a property. It has the highest priority, meaning the lender has first claim over the property if the borrower defaults. Private lenders often provide first mortgages for high-value projects or investments.
Second Mortgage
A second mortgage is a loan that is secured by a property that already has an existing first mortgage. Private lenders provide second mortgages to help borrowers access additional funds without disturbing their primary loan. Second mortgages can be classified into:
- Registered Second Mortgage: This is recorded on the title of the property and is a formal loan agreement with legal standing. In case of a default, the second mortgage lender is paid after the first mortgage holder.
- Unregistered Second Mortgage: This type of loan is not recorded on the title of the property but is secured through a legal agreement. It allows borrowers to access quick funding without going through the formal registration process. However, it carries more risk for the lender, resulting in higher interest rates.
Benefits of Private Lending
- Fast Approvals and Settlements: Unlike traditional bank loans, which can take weeks or even months to approve, private lending offers quicker processing times, often settling within days.
- Flexible Lending Criteria: Private lenders can offer more flexible solutions, focusing on the potential of the project and the security offered, rather than strictly on credit history or income documentation.
- Higher Loan-to-Value Ratios (LVR): Private lenders may offer higher LVRs, especially when using second mortgages or if the borrower has sufficient equity in other assets.
- Tailored Solutions: Each private loan can be customized to the borrower’s specific needs, with flexible terms, loan amounts, and repayment options.
When to Consider Private Lending?
- When you need fast access to capital for a business or property development opportunity that cannot wait for traditional loan approval processes.
- When conventional banks won’t approve your loan due to stricter lending criteria, credit history, or income verification issues.
- When you need short-term finance, such as bridging loans or cash flow injections, with the flexibility to repay quickly.
Speak with Sanford Finance About Private Lending
If you’re considering private lending to fund a property purchase, development project, or for short-term financial needs, Sanford Finance can guide you through the options available. Our expertise in private lending allows us to find the right lender for your specific requirements, ensuring a fast, flexible, and efficient funding solution.
Contact us today to learn more about our private lending solutions and how we can assist with your financial goals!