Who private lenders are
Private lenders are non-bank funders that lend their own or investors' money, usually secured by property. They include private credit funds, mortgage funds, family offices and experienced individual investors. Most lend for terms of months, not decades, and price the loan around the risk of the specific deal.
Because they don't follow bank credit policy, private lenders can fund situations banks decline: tax debts, recent defaults, irregular income, complex company structures, or a settlement that has to happen next week.
How private lenders assess a deal
- The security. Property type, location, condition and value matter more than anything else.
- Loan to value. Many private first mortgages go up to around 65% to 75% of value. Second mortgages, vacant land and regional property are usually lower.
- The exit. A sale, refinance or definite payment that repays the loan within the term.
- The story. Why the money is needed and why a bank isn't the answer right now.
What private lenders fund
- First mortgages, including refinancing a bank loan that's in arrears or about to expire.
- Second mortgages and caveat loans behind an existing loan.
- Bridging between a purchase and a sale or refinance.
- Construction, completed stock and land loans for developers.
What private loans cost
Private lending costs more than bank lending. Interest is usually charged monthly, sometimes in advance or capitalised. You'll also pay an establishment fee, the lender's legal costs, a valuation and sometimes a line fee or exit fee. Because terms are short, fees are a large share of the total, so compare offers on the total dollar cost over the term you expect to need.
How to choose a private lender safely
- Get a written offer that lists the rate, every fee and the default terms before you pay anything significant.
- Be wary of anyone asking for large upfront fees before a valuation or an offer.
- Read the default and extension terms closely. That's where costs climb if the exit runs late.
- Get independent legal advice on the loan documents. Many lenders require it.
- Only borrow for a genuine business purpose and sign a business purpose declaration you can stand behind.
Why use a broker for private lending
Private lenders differ widely on property types, locations, loan sizes and pricing. A broker who deals with them every week knows which funders want your type of deal, can run several in parallel without multiple credit enquiries, and can negotiate on fees and terms. FundFox brokers work with a wide network of private funders alongside our bank and non-bank panel.