Risks Of Private Mortgage Lending
We collect late fees that both act as a deterrent and a source of income should the payments be late.
Extended Term (Late Payoff)
Yes, your money would still be tied into the note in this case, but you would still be earning the contracted 12% APR.
Should this happen there are two remedies you have available to you.
- One, since there is an Assignment of Rents written
into every mortgage, you can immediately begin
collecting the rent. 99% of the time the rent is higher
than the note payment and so you will likely improve
your rate of return through the default.
- Two, you could sell the property. Of course, you will need to foreclose on the property, but because the borrowers are all investors and not owner occupants, they rarely fight to hold on to the property; they would rather cut their losses and walk away. The foreclosure process is typically easy with investor borrowers. Once you own the property you could sell it if you no longer want to be a landlord or just desire profit rather than cash flow. Because the equity positions are at minimum 35%, you will likely be able to sell the property for a large profit and make more than you would have had the investor been current on their note.
- Three, because of thorough due diligence, to date, none of the private mortgage notes arranged by EquityBuild Finance have ended in default and no property has had to be foreclosed on.