I have just expanded my real estate financing business to include Hard Money and Private Money Loans on both residential and commercial real estate. I am associated with one of the best companies in the nation; a sterling reputation; and one that produces loans…not just a “talker”. Many have asked me, “what is a hard money loan”…so here is my answer. Please call or e-mail me if you are in need of one of these loans:
A hard money loan is a specific type of real estate based loan through which a borrower receives funds secured by the value of a parcel of real estate. Hard money loans are typically issued by private investors or companies. Interest rates are typically higher than conventional commercial or residential property loans because of the shorter loan durations associated with hard money loans. Most hard money loans are used for projects lasting from a few months to a few years. Hard money is similar to a bridge loan, which usually has similar criteria for lending as well as cost to the borrowers. The primary difference is that a bridge loan often refers to a commercial property or investment property that may be in transition and does not yet qualify for traditional financing, whereas hard money often refers to not only an asset-based loan with a high interest rate, but possibly a distressed financial situation, such as arrears on the existing mortgage, or where bankruptcy and foreclosure proceedings are occurring….which are very present in the current economy.
The qualifying criteria for a hard money loan varies widely by lender and loan purpose. Credit scores, income and other conventional lending criteria may be analyzed. However, most hard money lenders primarily qualify a loan amount based on the value of the real estate being collateralized. This is a key factor in an economy such as we are in now. Typically, the biggest loan one can expect would be between 65% and 70% of the property value. That is, if the property is worth $100,000, the lender would advance $65,000 – $70,000 against it. This low LTV (loan to value) provides added security for the lender, in case the borrower does not pay and they have to foreclose on the property.
This kind of says it all…so let me know if I can be of service…for both residential and commercial real estate loans.
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