It’s not uncommon to hear mortgage industry insiders refer to hard money lenders as being a final option. While this can be true to the extent that numerous borrowers who solicit loans from hard money lenders do so as being a final option, there are numerous cases in which a hard money lender might be sought before a traditional 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 last option.
Commercial Real Estate Development – Let’s say an actual estate developer has sunk $10 million right into a development deal and originally planned to sell units in January and would then commence to recoup their investments dollars from your project. As is the situation with lots of such endeavors, delays may push back the start sales date or the project might go over budget, leaving the developer using a cash negative situation. The developer now have to take out a bridge loan in order to get through his cash poor period in order to “survive” up until the project starts to realize a cash positive position. With a traditional loan, the bank would not push through the borrowed funds for that borrower for 4-6 weeks. The developer would default on his original loan or will not have funds on hand to end up the project. The developer needs cash right now and oftentimes needs the money for just a two to four month period. Within this scenario, a hard money lender will be the perfect partner simply because they can provide a loan efficiently and quickly.
Rehab Investor – Another illustration of a difficult 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 simply because they would struggle to verify that the rehabber will probably be capable of promptly sell the units for a profit — particularly with no current tenants to offer rent to handle the mortgage. The difficult money lender would, in all likelihood, function as the only lender willing to battle this type of project.
Flipping Properties – Another group who might use hard money lenders as a starting place rather than a last option are property investors trying to “flip properties.” If an investor locates a home they deem as a great value, they might need quick and secure financing to adopt buy, renovate and then sell the house quickly. Anyone trying to flip real estate property will not wish to hold onto the property for a long period and also the temporary loan from https://www.accreditloan.com/ will accommodate this need. The pdkfqq can be structured as interest only, keeping the expenses low. When the property comes through the individual that is flipping the property, the primary is paid back as well as the profit is kept or reinvested in to the next project.
A Borrower In Foreclosure –
The last scenario of hard money involves someone who finds themselves in foreclosure. After a homeowner falls behind on their house payments, most lenders will never give them a loan or restructure their current loan. Occasionally, someone who may be facing foreclosure will get a hard money loan to prevent foreclosure proceedings and utilize enough time to market the property.
The question remains why would hard money lenders loan money if a traditional bank wouldn’t even consider such a g.amble. The correct answer is two fold. First is that hard money lenders charge higher rates than traditional lending institutions. The second is the fact that hard money lenders need the borrower to have at least 25-30% equity in actual estate as collateral. This insures that in case the borrower defaults on their own loan that the lender can continue to recoup their initial investment.
A hard money loan is essentially a relationship between a borrower in a tough spot (either coming from a time sensitive perspective or because of the poor financials) and Accredit Money Lender that is risk adverse and it is ready to take a risk for any higher return. While hard money loans can be a last option for many, there are numerous scenarios when hard funds are the only method to go.