Private Mortgages Australia Secures $100M Institutional Backing

The Private Mortgages Australia team

The PMA team: Shanta Lobo (Senior Relationship Manager), Tony Barbone (Managing Director), Tim Hart (Director), Julie Ciccone (Business Development Manager) and Peter Cuskelly (General Manager).

Funding enables larger loan amounts and more competitive interest rates

 30 May 2019: An independent wholesale funder has committed to investing up to $100 million with specialist commercial mortgage manager Private Mortgages Australia to fund its portfolio of registered first mortgage loans secured by Australian property.

The investment will enable PMA to grow the number of loans they are able to service and will see the maximum loan amount increase from $2 million to $10 million on registered first mortgages. It has also allowed PMA to offer more competitive interest rates with their base rate now at 9% per annum for applicable loans.

“We expect that the changes to loan amounts and interest rates will attract a wider pool of borrowers and will help grow the business exponentially in the next few years,” said Barbone. “More and more of our referrers are coming to us looking for a more flexible lending solutions after their clients haven’t been able to obtain funding from the banks, so it’s great that we will be able to help even more of them now.”

Private Mortgages Australia, which specialises in short-term loans for small-to-medium businesses, has recently seen a marked increase in the number of borrowers coming to them for finance after being turned down by the banks. This funding will help the national lender to accelerate the growth of its lending business to Australian SMEs and developers.

“Receiving this level of backing is a landmark achievement for Private Mortgages Australia, our borrowers and referrers,” said PMA Managing Director, Tony Barbone. “Our backers clearly believe we are a leader in this space and have confidence in our business model to provide fast and flexible finance to our SME and developer clients. We’re just about to celebrate our fifth year in operation and are excited to have the opportunity to further build the business and deliver even better products and service to our clients.”

10 Questions For A Private Lender

Private Mortgages Australia explores what to ask a private lender.The strict lending requirements imposed by traditional bank lenders can mean that many borrowers have trouble qualifying for a conventional mortgage. However, a private lender provides a smart alternative for a business borrower who can’t get finance from a bank.

Private mortgage finance usually comes from private investors or institutional funders who are willing to loan borrowers money for a business purpose using a property as security. The process can be quite complicated but choosing the right lender and knowing the right questions to ask can make a private mortgage a great option. These are some of the questions to ask your private mortgage lender.

1. What types of products do you offer?

A private lender may offer a range of mortgages, such as caveat loans, car finance, invoice factoring, first-ranking mortgages or second-ranking mortgages. If you are looking for a specific type of loan product, check with the lender about the types of products they offer so that you can find the right type of business loan that meets your needs.

2. How quickly can you assess my application?

Private lenders are usually able to process applications much more quickly than traditional bank lenders. Generally, as long as the borrower has sufficient equity in the underlying security, a private lender may be able to approve a loan much more quickly than a traditional lender, sometimes offering pre-loan approval within a few hours.  However, be wary of lenders who advertise 24-hour loans as this is often a trap to get unsuspecting borrowers committed. These 24 hour loans are commonly also called “Caveat Loans”. Many say they ‘can’ offer loans within 24 hours, but with the amount of work that goes into a loan offer it is very unlikely that this will actually happen. Some exceptions do exist, for instance where a valuation has already been conducted by a reputable valuation firm thus reducing the need to order a new valuation and speeding up the application.

3. What interest will I pay on my mortgage?

The interest rate will vary depending on a number of factors including the type of security, location, and the length of time taken to pay it back. After an initial assessment of an application a lender should be able to quote a firm rate based on the information provided. Be wary of Indicative Offers that still quote a rate range or that sound too good to be true, as quite often the interest rate is much higher when the actual loan offer comes back.

4. Where does the money come from?

This is a very interesting concept that very few people consider, where does a private lender actually get their money from? A lot of private lenders use a sophisticated investor networks to underwrite their loan advances. Other private lenders raise funds from wholesale or retail sources with the use of an Australian Financial Services License (‘AFSL’).

5. Who makes the lending decision?

In some cases it is the individual investor that makes the final decision to lend the funds required and will essentially “write the cheque”. This isn’t an ideal situation. Imagine that you are a borrower and you submit a loan to a private lender. Everything seems to be going well, you pay the upfront fees, order the loan documents from the solicitor, but then are taken by complete surprise when your loan application is rejected despite being formally approved. What has occurred is that the loan was approved by the ‘middle man’ but then turned down by the person writing the cheque. Unfortunately this occurs all the time.

The smarter alternative is to make sure that the private lender is the one who is making the decisions. This is a safer and more effective situation for the borrower.

6. Are there any hidden costs?

Sometimes there are additional fees that you may not be aware of upfront. Check with the private lender about any additional costs that may be conditional upon specific conditions or circumstances. Make sure you work with a well-respected lender that has a transparent lending process so you don’t get hit with any unexpected fees.

7. What are the optional features?

If you are looking for specific features, ask the lender about whether these will be offered with the mortgage. Popular features that provide convenience for borrowers include prepaid loan terms. A pre-paid loan term is where a borrower doesn’t need to service the loan payments for a specified period of time. Some lenders only offer this feature for one month. Could you imagine the strain of having to service a private loan with a higher than bank interest rates every month? This would be very difficult especially if the reason for approaching the private lender in the first place was to assist with cash-flow issues. It is very important to work with a private lender that understands this and can offer a loan term that is capitalised with reliance on an exit strategy.

8. How much can I borrow?

Generally, private mortgages can be approved for any amount range from $20,000 to $4,000,000 or more, and up to 75% of the value of the underlying security. However, a good lender will treat every loan application as a unique case and can therefore lend based on the individual circumstances.

9. Do I need security for a loan?

In most cases the lender will require real estate as security. You should have some equity built up in the property to be able to borrow against it.

10. Can I make extra repayments?

If you would like the option to make extra repayments, ask the private lender about the possibility of making extra repayments and whether a fee will be charged if you do choose to make them.

 

By Tony Barbone

Managing Director, Private Mortgages Australia