Ask Cornerstone: Can I find private money loans at a lower interest rate if it is secured by a first trust deed?

private money loans secured by a first trust deed

Can I find private money loans at a lower interest rate if it is secured by a first trust deed?

I own two properties free and clear. I’ve been running ads in online classifieds offering people 4.5% for a loan secured by a first trust deed on those properties. I have good credit and the loan is 60% the value of the property.

I don’t know why people will hold money in the bank at 1% but don’t consider a 4.5% low risk loan secured by a first trust deed.  Are there any other techniques to getting private money loans in a situation like this without the points, cost, high interest rate, and hassle? I need the money sooner than I could get a bank loan. 

A likely reason that people are not willing to give a 4.5% interest loan like you have proposed is the opportunity cost where they could be getting a higher interest rate with the same risk (including the services of a broker) somewhere else.  Although you are right, people do hold money in their banks at 1%, but a banks offer trust and liquidity. Someone holding money in a bank is not the person likely to make a real estate loan and especially not to someone they don’t know and without a licensed broker involved.

A person that is willing to make a private money loan in a real estate transaction knows he or she can get 6% to 9% for equally safe private money loans with 60% LTV, or 9% – 12% with a only a little more risk.

The points come into play because the loan is made through a broker who handles the transaction including the collateral valuation, documentation, and escrow. In many cases the broker will also handle foreclosure if the borrower stops paying on the loan. This gives the lender valuable services and leaves them less legally exposed from potentially not using proper disclosures and/or documentation. Since the points are paid by the borrower, the work is done by the broker, and the investor gets most of the benefit, there is no incentive for the investor to make the loan directly.

So decision is very easy for a lender/investor. Although your 4 simvastatin generic name.5% offered is higher than a bank's 1%, it's much less than 6% to 9% for comparable private money loans that include the services and protections provided by a broker.

You may be able to find a family member or friend to loan to you with your offered interest rate. Start by asking around and someone might “know someone”, especially in this stock market where investors might be looking elsewhere to put their money.

Otherwise, contact us and we might be able match you with an investor for your needs.

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