Can someone explain to me the role of the Lender?
I am in a real estate class and this is the definition and its confuses the hell outta me.
“The lender in an intermediary aggregating savers’ funds and then allocating them to individuals or corporations who invest in tangible assets.”
From my understanding the lender would be the bank. What are they investing as they are giving money to the person wanting the mortgage loan. Whose the savers in this term and what asset are they investing.
Clearly I am confused please give a good explanation.
Okay, it’s pretty easy.
The “savers” here would be the people who keep their money in the bank – in checking accounts, savings accounts, CDs, whatever.
The banks are the “lenders” – the “intermediary lenders” (the go-betweens). They are investing in a loan, is the way to think about it.
The bank writes out a check for $500,000 (say), to a couple who want to buy a house. The bank got the money from putting together all the money from all the little accounts it had. In return, the bank got a “promise to pay” from the couple (probably also backed by the collateral of the house) – the bank made a loan. That’s the business of banking.
Real Assets Investing (Part One)