How much are private lender fees?

Before choosing a lender

The amount is lender- and file-specific, so it should be calculated from the property, equity or down payment, income, debts, and current lender policy. For many homeowners and buyers, this question comes up when a traditional lender has already created uncertainty. Before another application is submitted, it is worth identifying the exact underwriting hurdle and the documents that could change the lender’s assessment.

There can be several layers of cost

In practice, private transactions may include lender fees, broker fees, legal fees, appraisal costs, discharge expenses, and sometimes renewal or extension fees.

Know what is deducted from proceeds

From an underwriting perspective, if fees are netted from the advance, the borrower receives less cash than the face amount of the mortgage.

Ask for a complete funds-flow estimate

For this particular question, before signing, compare the gross mortgage amount, net funds available, monthly payment, interest calculation, and total expected cost to exit.

Compare the trade-offs

A homeowner facing a short maturity deadline may use private financing to create time for a sale or refinance. The deal only works well if the expected exit can realistically happen before the private term ends.

Documents to have ready

• or request current first-mortgage statement and maturity date
• or request property tax status and any other registered secured debts
• or request a realistic property value or recent appraisal if available
• or request the exact amount needed, intended use of funds, and planned payoff or refinance date