Private lending

[nepoez]

Hi all,

One of the ways to acquire a down payment for many people are via private lenders. I`ve been approached by a buyer who needs 20k for a down payment who will pay for the lawyer fees and monthly interest of $500. The reason for the need to borrow is because the buyer owns a house already which is on the market now and won`t have the down payment for the new house until the old one is sold. It`s good yield for me if I know I can be protected by law.

I`m really interested in some suggestions from the people in this forum. Should I walk away?

Thanks,

Nepoez

 

[GarthChapman]

You can secure your loan by way of a mortgage or by otherwise registering your loan on the Title of one of the Borrower`s properties (in Alberta you can register the loan by way of Caveat on the Title but in BC I think it would be a different instrument). The one with the best equity is usually the one you want, although in this case perhaps best to be on the house that is currently for sale.

Remember to do your due diligence on the Borrower and on the Asset to be pledged (just like the banks do only more quickly and with less paperwork).

The 5 C`s of Credit are:
1) Capacity (Ability to pay - Income)
2) Credit (Credit history - do they pay their bills?)
3) Collateral (What is the pledged asset? If a revenue property, then is it self sufficient?)
4) Capital (Borrower`s investment in the property - do they have some `skin` in the investment?)
5) Character (not overly significant unless you are a Stripper wanting a loan for your new costume...)


Hope that helps,

 

[nepoez]

Thanks Garth,

That does help. It gives me some idea of what to work with.

Nepoez


QUOTE (GarthChapman @ Aug 4 2008, 12:00 PM) You can secure your loan by way of a mortgage or by otherwise registering your loan on the Title of one of the Borrower`s properties (in Alberta you can register the loan by way of Caveat on the Title but in BC I think it would be a different instrument). The one with the best equity is usually the one you want, although in this case perhaps best to be on the house that is currently for sale.

Remember to do your due diligence on the Borrower and on the Asset to be pledged (just like the banks do only more quickly and with less paperwork).

The 5 C`s of Credit are:
1) Capacity (Ability to pay - Income)
2) Credit (Credit history - do they pay their bills?)
3) Collateral (What is the pledged asset? If a revenue property, then is it self sufficient?)
4) Capital (Borrower`s investment in the property - do they have some `skin` in the investment?)
5) Character (not overly significant unless you are a Stripper wanting a loan for your new costume...)


Hope that helps,