It isn’t uncommon to learn mortgage industry insiders refer to hard money lenders as being a final option. While this might be true to the extent that numerous borrowers who solicit loans from hard money lenders do so as a final option, there are numerous cases in which a hard money lender could be sought before a regular banking institution. Let’s check out some scenarios where Accredit Money Lender can be quite a first stop as opposed to a last option.
Commercial Real Estate Property Development – Let’s say a genuine estate developer has sunk $ten million in to a development deal and originally planned to market units in January and would then start to recoup their investments dollars from your project. As is the situation with many such endeavors, delays may push back the beginning sales date or perhaps the project might go over budget, leaving the developer with a cash negative situation. The developer now have to take out a bridge loan to acquire through his cash poor period to be able to “survive” till the project starts to realize a cash positive position. With a traditional loan, the financial institution would not push through the loan for that borrower for 4 to 6 weeks. The developer would default on his original loan or will not have funds on hand to finish in the project. The developer needs cash right now and oftentimes needs the cash for only a 2 to 4 month period. In this particular scenario, a difficult money lender will be the perfect partner because they can provide a loan quickly and efficiently.
Rehab Investor – Another illustration of a tough money scenario is actually a rehab investor who needs a loan to renovate run down homes which are non-owner occupied. Most banks would run out of this loan because they would struggle to verify the rehabber will be able to promptly sell the units to get a profit — particularly with no current tenants to provide rent to handle mortgage. The hard money lender would, in all likelihood, be the only lender willing to battle this type of project.
Flipping Properties – Another group who could use hard money lenders being a place to start as opposed to a last resort are property investors seeking to “flip properties.” If an investor locates a house which they deem to become a great value, they might need quick and secure financing to take buy, renovate and then sell the house quickly. Anyone seeking to flip property fails to want to hold on to the property for a long time and the temporary loan from Accredit Licensed Money Lender will accommodate this need. The pdkfqq can be structured as interest only, keeping the costs low. After the property is sold by the individual who is flipping the home, the main pays back and the profit is kept or reinvested in to the next project.
A Borrower In Foreclosure –
One final scenario of hard money involves somebody that finds themselves in foreclosure. When a homeowner falls behind on their own house payments, most lenders will never provide them with that loan or restructure their current loan. Occasionally, someone that is facing foreclosure will obtain a hard money loan to prevent foreclosure proceedings and use time to promote the house.
The question remains why would hard money lenders loan money if a traditional bank wouldn’t even consider this kind of g.amble. The reply is two fold. The very first is that difficult money lenders charge higher rates than traditional finance companies. The second is the fact that hard money lenders require borrower to have at the very least 25-30% equity in real estate as collateral. This insures that when the borrower defaults on the loan that this lender can still recoup their initial investment.
A difficult money loan is basically a relationship between a borrower in a tough spot (either from a time sensitive perspective or because of the poor financials) and Accredit Licensed Money Lender who is risk adverse and is willing to take a chance for any higher return. While hard money loans might be a last resort for a lot of, there are many scenarios when hard money is the only method to go.