Other Lenders Financing Sources
Lenders for real estate property may include credit unions, pension and trust funds, finance companies, and individual inventors or friends. Let review each option.
Pension funds and trust funds traditionally have channeled their money to high-grade government and corporate bonds and stocks. However, an alternative for some is to place more money into real estate loans and real estate development loan. Since their rapid growth is projected, pension and trust funds will likely become a major source of real estate financing in the future. At present, pension and trust funds either buy mortgages through mortgage bankers or on the open market. In some localities, pension fund members can tap their own pension funds or for home mortgages at very reasonable rates.
Finance companies that specialize in making business and consumer loans also provide limited financing for real estate. As a rule, finance companies seek second mortgages at interest rates 2 to 5 percent higher than the rates prevailing on first mortgages. First mortgages are also taken as collateral; however, the lenders already discussed usually charge lower interest rates for these loans and thus are more competitive.
Credit unions normally specialize in consumer loans. However, some of the country's 29,000 credit unions have recently branched out into first and second mortgage loans on real estate. Credit unions are an often overlooked, but excellent source of home loan money.
Individuals are sometimes a source of cash loans for real estate, with the bulk of these loans made between relatives or friends. Generally, loan maturities are shorter than those obtainable from the institutional lenders already described. In some cities, persons can be found who specialize in making or buying second and third mortgage loans of up to 10-year maturities.
Lenders Financing To Secondary Market