By Yanni Raz
If you're the owner of real-estate whether it is single family home, condo, house building or a commercial property, in this economy, chances are that you already know about Hard Money Loan.
Basically a hard cash or a private money loan is a sub-prime loan. A lender puts more accent on the safety instead of your revenue and credit. When you go to a pawn shop to pawn an item, the store owner does not mind what you do for living, how much you make, and what your credit report is like. He only cares for the value of that time and that too a firesale price.
In a similar fashion, a personal lender, looks more at the value of your real property and how much equity you have in it. If the property is worth a million bucks and you owe $300,000. You can borrow $200,000 to $300,000 more on it simply. The formula lenders use is known as loan to price ratio. Mostly it is easy to get a loan up to 60% loan to worth ratio.
Qualifying for this type of loan is less harsh in comparison to a conventional loan especially when it is a non-owner occupied or a commercial property. Debt ratios are liberal and credit score has tiny consideration. If you had great debt ratios and good credit score why will you be making an application for a hard money loan? Hence if your hard funds provider is asking you for your credit history, you need to call somebody else.
The Pros are it is fast. Mostly you can get funds as quickly as 5 working days. Qualifying, as discussed above, is far easier. Without hard money loans lot more folk will lose their properties. Hard cash or personal cash loans satisfy an important need in the society. It's a bridge loan and can be a great relief. It's also called a band-aid loan.
The Cons are it is short term. Often no more than seven years. Typically it is from one to three years. It is interest only. IR is high, from 10 to 12%. Fees are high. Expect to pay 3 to 6 points.
Not everyone who gets a loan like this has credit or revenue problem. In this economy, more individuals who are money lenders have sound credit and good income but somehow cannot get a bank or a conventioanl loan for one reason or the other. Banks are taking months to close a loan.
Money for funding these loans comes from personal investors; from retirement; hedge funds and Trust Deed Backers.
Basically a hard cash or a private money loan is a sub-prime loan. A lender puts more accent on the safety instead of your revenue and credit. When you go to a pawn shop to pawn an item, the store owner does not mind what you do for living, how much you make, and what your credit report is like. He only cares for the value of that time and that too a firesale price.
In a similar fashion, a personal lender, looks more at the value of your real property and how much equity you have in it. If the property is worth a million bucks and you owe $300,000. You can borrow $200,000 to $300,000 more on it simply. The formula lenders use is known as loan to price ratio. Mostly it is easy to get a loan up to 60% loan to worth ratio.
Qualifying for this type of loan is less harsh in comparison to a conventional loan especially when it is a non-owner occupied or a commercial property. Debt ratios are liberal and credit score has tiny consideration. If you had great debt ratios and good credit score why will you be making an application for a hard money loan? Hence if your hard funds provider is asking you for your credit history, you need to call somebody else.
The Pros are it is fast. Mostly you can get funds as quickly as 5 working days. Qualifying, as discussed above, is far easier. Without hard money loans lot more folk will lose their properties. Hard cash or personal cash loans satisfy an important need in the society. It's a bridge loan and can be a great relief. It's also called a band-aid loan.
The Cons are it is short term. Often no more than seven years. Typically it is from one to three years. It is interest only. IR is high, from 10 to 12%. Fees are high. Expect to pay 3 to 6 points.
Not everyone who gets a loan like this has credit or revenue problem. In this economy, more individuals who are money lenders have sound credit and good income but somehow cannot get a bank or a conventioanl loan for one reason or the other. Banks are taking months to close a loan.
Money for funding these loans comes from personal investors; from retirement; hedge funds and Trust Deed Backers.
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