LENDING IN FIRST MORTGAGES

Historically, people with surplus funds have been looking to areas where they are able to achieve better rates than those offered by traditional bank products. Current bank and term deposits have been paying 1.5-3%.

A well- established opportunity is lending in first mortgages.

This works where monies are lent to people looking to borrow money and unable to secure bank finance in a timely manner. You may ask why lend to someone unable to get finance from a bank? The reasons are;

• Banks are not lending as much as they used to making it very difficult for people to get finance, particularly in a timely manner where settlement needs to occur
• Many borrowers are new or established businesses that cannot prove their income
• Banks are not lending on as many commercial properties like in the past

The loans are arranged through a solicitor and security for the loan is a registered First Mortgage over the property. Therefore if the borrower cannot pay and defaults the property is sold and first monies go to the lender which is secured by title.

Generally the interest rates that can be achieved are from 8%, fixed for one year.

It is important that when looking at this form of investment to be careful and ensure

• Monies are only lent on a first mortgage basis (higher returns can be offered for second mortgages though these are very risky)
• The monies lent do not exceed 70% of the value of the property
• A reputable firm of Solicitors is used.

For more information, please contact me on (02) 8297-6666