It’s not uncommon to know mortgage industry insiders refer to hard money lenders as a last resort. While this can be true to the extent that many borrowers who solicit loans from hard money lenders do so as a final option, there are lots of cases in which a hard money lender may be sought before a conventional banking institution. Let’s take a look at some scenarios where Accredit Money Lender might be a first stop instead of a final option.
Commercial Real Estate Property Development – Let’s say a real estate developer has sunk $ten million right into a development deal and originally planned to promote 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 the project may go over budget, leaving the developer with a cash negative situation. The developer now need to take out a bridge loan to get through his cash poor period to be able to “survive” until the project actually starts to realize a cash positive position. Using a traditional loan, the financial institution would not proceed the loan for that borrower for four to six weeks. The developer would default on his original loan or will not have money on hand to end the project. The developer needs cash right now and oftentimes needs the bucks for only a two to four month period. In this particular scenario, a hard money lender will be the perfect partner simply because they provides a loan quickly and efficiently.
Rehab Investor – Another demonstration of a hard money scenario is really a rehab investor who needs a loan to renovate run down homes which are non-owner occupied. Most banks would run from this loan simply because they would be unable to verify the rehabber will be capable of promptly sell the units for a profit — especially with no current tenants to supply rent to handle mortgage. The hard money lender would, in all probability, function as the only lender willing to consider this type of project.
Flipping Properties – Another group who may use hard money lenders as being a place to start as opposed to a final option are real estate investors seeking to “flip properties.” If the investor locates a house which they deem to become a great value, they could need quick and secure financing to adopt buy, renovate then sell the home quickly. Anyone seeking to flip property fails to wish to hold onto the property for long periods as well as the temporary loan from Accredit Licensed Money Lender will accommodate this need. The pdkfqq can also be structured as interest only, keeping the expenses low. Once the property is sold by the individual who is flipping the home, the principal pays back as well as the profit is kept or reinvested in to the next project.
A Borrower In Foreclosure –
One final scenario of hard money involves somebody who finds themselves in foreclosure. When a homeowner falls behind on their house payments, most lenders will not provide them with financing or restructure their current loan. Occasionally, someone that is facing foreclosure will get yourself a hard money loan to prevent foreclosure proceedings and use enough time to sell the property.
The question remains why would hard money lenders loan money when a traditional bank wouldn’t even consider this kind of g.amble. The correct answer is two fold. The first is that difficult money lenders charge higher rates than traditional lending institutions. The next is that hard money lenders require the borrower to get a minimum of 25-30% equity in actual estate as collateral. This insures that in case the borrower defaults on their loan that the lender can continue to recoup their initial investment.
A tough money loan is basically a married relationship from a borrower in a tough spot (either coming from a time sensitive perspective or due to their poor financials) and Accredit Licensed Money Lender who is risk adverse and is also ready to take a risk for a higher return. While hard money loans may be a last resort for many, there are plenty of scenarios when hard money is the only way to go.