What Is A Private Mortgage? Module 1: AR Mortgages Educational Series
In Module 1, we will cover the following topics;
1. What is a private mortgage?
2. Why do people borrow privately?
3. Why do people lend privately?
4. What is the regulatory environment?
For an appointment with a Product Specialist call the office on 1300 652 158
Watch the video and/or read the transcript below.
Julia: Hi everyone. Julia Bonello here, and welcome to our very first
instalment of our AR Mortgages educational videos. I’m here with Director,
Daniel: Good morning.
Julia: So Daniel, let’s get started. Why don’t you tell us: What is a
Daniel: That’s probably the best place to start. But before we do that,
I just want to point out a few things.
Julia: Oh, you have a quick note before start?
Daniel: I do, just a quick footnote.
Julia: Okay. Go for it.
Daniel: Although this is an educational series, what it really is, is
an insight into how we lend privately. It’s more than educating
you about how you should do it. It’s more, like I said, how we
do it. You can take this information away, do your own research,
speak to your own accountants, speak to your own lawyer, speak
to your people, and work out what’s best for yourself for your
Julia: What’s best for you.
Daniel: So it’s not designed to be financial advice.
Daniel: So moving along, what is a private mortgage? A private mortgage
is a loan between private people, so private companies to other
private individuals or other private companies, or actually to
other public companies. A non-private loan is one between an
institution, such as bank or a non-private company, and another
entity and that entity be public or private that it’s lending
to. So that’s probably the best definition. It’s not really that
deep to grasp. But the next few points you’re going to bring up
probably will be.
Julia: Okay, great. Well, let’s move on then. So why do people borrow
Daniel: People have borrowed privately for thousand of years. It’s
always happened. Before banks, people were lending privately.
But more so than ever at the moment, we’ve had a bit of a shift
in credit availability. Banks have become really, really tight,
and they’re very reluctant to lend to people that really need
it, not in terms that they’re in a dire situation, but the guys
that need it to make more money out of it, so wheeler-dealers
types, entrepreneurial types, they may have chequered history,
or they may need money in a hurry or when I say a hurry, faster
than what a bank or an institution can lend them the money. Or
they may have funny types of security for whatever reason. But
there is a big market out there of borrowers who really are
prepared to pay a little bit more than what they pay from a
Julia: So they don’t have to go through the banks.
Daniel: Exactly. They just want to get the deal done.
Julia: Okay, cool. So why do people lend privately?
Daniel: This is an easier one for me to answer. I know why I lend
Julia: Let’s focus on that. Why do you lend privately?
Daniel,: Okay. Yeah, I prefer to lend privately rather than put my money
in the bank because i.e. I want to cut out the middleman. I
mean, the banks are effectively, when you put on deposit with
them, they’re taking your deposit and they’re effectively
lending it out like you would do it direct. Private lenders are
touchy feely people. They like to be able to drive . . . they’re
usually property investors.
Daniel: They like to be able to drive up, touch the asset, feel the
asset, and know it’s always going to there come hell or high
water. When you invest in companies or shares, they’re not
always going to be there as we’ve seen recently. Insurance
companies as well.
Julia: So it’s a control thing really.
Daniel: It kind of is. I mean, as a private lender, it works for you.
It works psychologically for you. It’s a better fit. You feel
more comfortable with it, plus you get a decent yield. So you’re
often getting 300 or 400 basis pints above, probably more
actually in certain situations, above what you’d get in a bank.
Daniel: But there are downsides to it. You’ve got to actually find the
deals, and there’s a whole lot of other things we’ll go into
later on in this educational series.
Julia: All right. Well, let’s not keep this video too much longer.
Let’s finish off with: What is the regulatory environment?
Daniel: As a private lender and you want to lend to another private or
public person, there’s really no regulatory environment. You’re
just one business person lending money to another business
person. So there’s nothing stopping you.
Daniel: Where the regulations kick in are where you’re lending to
consumers or people that really aren’t big, bad, and ugly enough
to look after themselves, which is old people. Just stuff that
doesn’t make sense to lend on. The other thing I want to point
out though is if you’re a private investor and you’re having a
finance broker introduce loans to you and they’re doing it not
on a one-off basis and they’re doing it on a regular, even
though they’re not controlling your money or controlling your
costs, they could still be caught be asset regulations, meaning
that broker would need to have a licence to be able to broker
those deals on your behalf, and not just a normal broking
license, but an actual, proper responsible manager type license
So they need to have a specific type of license to do it.
Julia: Okay. Excellent. Well, thank you Daniel, and thanks guys for
watching our very first instalment. We hope you tune in for the
next one. If you’d like an appointment with a product
specialist, call the 1300 number. Thanks for watching.
Daniel: Thanks very much.