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20 Nov 2014
Private Mortgage Investors - Who Are They?


To understand who private mortgage investors are, it really is first necessary to know very well what a private mortgage is. A private mortgage is a legal agreement, secured by real estate, between a borrower and a private lender that obligates you to pay money towards the holder of the mortgage note. A personal mortgage therefore creates a regular stream of income to the investor with the advantages and protections a mortgage lien provides. Gmeic.com

Typically, private mortgage investors may charge more interest and points (fees) on a mortgage than a bank could because the risk of lending to people who aren't eligible for normal mortgages is far greater. Quite often investors give loan to people with less than perfect credit, but they may also lend to property investors irrespective of credit.

Traditionally, private mortgage investors were those who had sold their home and agreed to restore a promissory note and a mortgage from the buyer. The benefits to the seller were threefold. Firstly, by giving such terms, the homeowner was more likely to sell their property in a slow market and obtain the full asking price. Secondly, the seller would be a guaranteed an everyday fixed income with a better rate than might be obtained from investing in a CD. Thirdly, if the buyer defaulted, then your owner would be entitled to foreclose on the property, just as if he or she were a financial institution. The benefit to the buyer of the privately funded home loan is that they don't have to concern yourself with an extensive check on their credit or finances.Gmeic.com

More recently, real estate investors have branched out into other areas of real estate financing. Some private investors specialize in lending money to professional property investors for the purchase and rehab of commercial and residential property. Others concentrate on making mortgage loans to small property developers for the buying raw land as well as the initial construction finance. You can even find some private investors that will lend to homeowners living on the street or provide second mortgage financing, much like a Home Equity Credit line.

Such has been the growth in private mortgage lending that there are now companies offering private mortgage investment services in the united states. Typically, these companies will either advertise individual mortgages for "purchase" by an angel investor, or syndicate a hard money loan amongst several private investors on their mailing list, or offer shares in a private mortgage investment fund.

Lastly, but by no means least, there are eco-friendly who specialize in buying privately operated mortgages at a discount, i.e. under the principal amount outstanding. These investors provide an important role in creating liquidity as to what would otherwise be an illiquid market. The key disadvantage of being a private mortgage holder is that you simply must wait for the loan to be paid back before you can access your capital. Automobile investor can't wait too long, then they will need to find a method of selling the mortgage to a third party and this is where this last type of private investor has their own.


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