It isn’t uncommon to learn mortgage industry insiders refer to hard money lenders as a last option. While this may be true to the extent that many borrowers who solicit loans from hard money lenders do so as a final option, there are numerous cases in which a hard money lender may be sought before a conventional banking institution. Let’s have a look at some scenarios where Accredit Licensed Money Lender may well be a first stop as opposed to a final option.
Commercial Real Estate Property Development – Let’s say an actual estate developer has sunk $ten million into a development deal and originally planned to promote units in January and would then begin to recoup their investments dollars from your project. As is the case with a lot of such endeavors, delays may push back your first step sales date or even the project could 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 in order to “survive” until the project starts to realize a cash positive position. Having a traditional loan, the lender would not proceed the financing for that borrower for 4-6 weeks. The developer would default on his original loan or would not have cash on hand to complete in the project. The developer needs cash at this time and oftentimes needs the money for just a 2 to 4 month period. Within this scenario, a difficult money lender will be the perfect partner because they can provide a loan quickly and efficiently.
Rehab Investor – Another example of a difficult money scenario is actually a rehab investor who demands a loan to renovate run down homes that are non-owner occupied. Most banks would run from this loan because they would be unable to verify that the rehabber will be capable of promptly sell the units for a profit — especially with no current tenants to offer rent to handle the mortgage. The hard money lender would, most likely, be the only lender willing to consider such a project.
Flipping Properties – Another group who might use hard money lenders as a starting point instead of a final option are real estate property investors seeking to “flip properties.” If the investor locates a property which they deem as a great value, they might need fast and secure financing to consider buy, renovate then sell the property quickly. Anyone seeking to flip real estate will not want to hold to the property for a long period and the temporary loan from https://www.accreditloan.com/ will accommodate this need. The pdkfqq can also be structured as interest only, keeping the expenses low. After the property is sold from the individual who is flipping the home, the principal pays back and also 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 financing or restructure their current loan. Occasionally, an individual that is facing foreclosure will obtain a hard money loan in order to avoid foreclosure proceedings and make use of time to promote the house.
The question remains why would hard money lenders loan money if a traditional bank wouldn’t even consider this type of g.amble. The answer is two fold. The first is that hard money lenders charge higher rates than traditional finance companies. The next is that hard money lenders require the borrower to possess a minimum of 25-30% equity in actual estate as collateral. This insures that if the borrower defaults on their loan that this lender can certainly still recoup their initial investment.
A hard money loan is basically a relationship from a borrower in a tough spot (either from a time sensitive perspective or because of the poor financials) and Accredit Licensed Money Lender that is risk adverse and is willing to take a risk for a higher return. While hard money loans might be a final option for many, there are many scenarios when hard cash is the best way to go.