With home loans taking up an increasingly big portion of the financial sector (close to a trillion and a half in value), finding a lender has become easier than ever before.
In what is now a highly competitive market, borrowers can choose from hundreds of options when searching for a home loan.
Most Australians source their loans through a bank as their first choice. However, securing a loan might not be so easy for those who do not fit into the standard criteria set by most traditional lenders.
If your client’s circumstances does not permit borrowing from the banks, a private lender is a perfectly viable option to consider.
What makes Private Lending different?
For clients who need funds urgently, whether to pay the ATO and creditors, and avoid repossession or being put into administration, private lenders are the perfect solution.
Private lenders have a much higher risk tolerance, and will deal with lo doc borrowers or even those with bad credit.
If this happens to be the banks’ reasonings for turning them away, there are four types of private loans that work perfectly for this scenario.
The four important types of Private Home Loans
Private lenders are not affiliated with banks or other traditional lenders. The loans instead come from specialised finance companies, investment firms, or even individuals. These are generally bound by a common thread – they specialise in tailoring shorter-term loans for people who need funds urgently.
These are loans that are usually taken to cover the expense of purchasing a new property, before selling off an older one. Bridging loans are interest-only, and are repaid once the older property is sold. These are great if things can be expected to go smoothly. However, a potential risk is that borrowers could be left with a shortfall on the money owed if they fail to sell the property, or if it simply sells for significantly less than expected.
Lenders take an interest in a client’s property. This means that loans are secured against property with equity. Caveat loans tend to be approved incredibly quickly – often within hours, or even minutes. Additionally, the terms of the loan can be very short. Higher interest rate aside, this is a prime option for clients whose main concern is speed.
Bad Credit Loans
Typically sought by borrowers with poor credit history. Someone with a credit history that includes a couple of negative items will be perceived by lenders as being of higher risk.
Reflecting this, these types of loans often come with slightly increased interest rates, to compensate for the risk being taken by the lender.
An upside of this is that it provides borrowers with bad credit a chance to repair their credit history, and possibly even build it up enough to be eligible for a traditional loan in the future.
This involves taking a loan on a property where a mortgage is already in place. Parents helping their children with a first home purchase may look into this option. First mortgages will still take priority over second mortgages, meaning that an important risk to note is the possibility that, in the worst case, a borrower may still owe money after losing their property in the first mortgage.
Considering a Private Home Loan?
Home loans of any sort are large financial undertakings, and as with anything finance-related, it’s best to come prepared with some research. It is important to compare options and carefully assess the costs and conditions. That said, if you think a private home loan is the way to proceed, consider giving Gryphon Financial a go.
We offer speedy settlements with a simple application and approval process, and will work with what would otherwise be insufficient documentation and even bad credit. Gryphon Financial will compare from over 200 private lenders with funds readily available for lending to secure a competitive deal for any client. All agreements are legal contracts regulated by the courts. Just send us your scenario and our well-trained lending managers will assist you from start to finish.
With over 20 years of experience in lo doc and bad credit private home loans, at Gryphon Financial, We Turn No into Yes.