Hard Money Loans

Hard money loans are tools for investors, business owners, property owners, would-be property owners and others for whom conventional loans are unattractive or unavailable. Originally, the term was used to describe any loan that was secured by property or other collateral, as opposed to unsecured borrowing, such as cash advances from a credit card or bank line of credit. Today, although the meaning has not really changed, the way that the term is used has. It can all be confusing to the average person, so we hope to shed a little light on the subject.

At one time, it was relatively easy to get a hard money loan. The bank knew that if you could not make your payments, they could take possession of your property. The only real consideration was the value of your property.

Times have changed. Foreclosures take longer. Banks are often unable to recoup their losses. The large number of defaults in recent years has actually hurt some of the financial institutions. Believe it or not, the funds that commercial lenders have available are not endless. Some have had to reduce the number of loans that they make. In general, all lending institutions have adopted stricter qualifications for potential borrowers, in many cases, making it more difficult for individuals to get the money that they need.

Commercial banks are governed by the Federal Reserve and they must follow certain rules and regulations. In addition, each bank has its own policies. We commonly refer to the considerations, rules, regulations and bank policies as red tape. When we apply for a loan, the paperwork can be overwhelming and very difficult for the layman to understand. Read this, initial here, sign there, etc, etc. The red tape is meant to protect the consumer and the bank, but even when you understand that, it can be frustrating. Plus, the whole process takes a lot of time. You might wait weeks, only to hear that your request was denied.

This is where private lenders offering hard money loans may come in. In most of the United States, private transactions are not regulated by state or federal laws. There is less red tape, so you will get your answer faster. There is still no guarantee, but at least you will know that you should look elsewhere for financing in a shorter period of time. There will be less confusion and less frustration. Of course, the policies of individual lenders vary. Some check credit, references and employment. Others are more concerned about how quickly you can repay.

A hard money loan is generally a short term solution. It is most attractive to investors and others that need money quickly, in a matter of weeks, to close on a deal or take advantage of a potentially profitable opportunity. Long term financing may be available, but in the time it takes to find it, the opportunity may be lost.

There are several advantages to hard money loans from private lenders, as opposed to secured loans from conventional lenders (the banks), particularly for real estate investors. Suppose you have the opportunity to buy a property that “needs work”. The seller is particularly motivated because he is facing foreclosure or moving out of state, so he is willing to sell for far below the assessed value of the property, as long as you can close the deal quickly. If you go to the banks, it will take at least 30-45 days (probably more) to close. A private lender may be able to hand you a check in a much shorter period of time.

Time is very important to someone who wants to take advantage of the auction of a foreclosed property or a trustee’s sale. You may have the bidder’s fee, but the trustees typically want the full amount within 14 days. The banks do not work that fast.

For those who can wait for the money they need for a real estate investment, traditional loans might be the way to go. But for everyone else, hard money loans make a lot of sense.

James has been in real estate for over 30 years and is an expert on residential and commercial hard money loans. He is a regular contributer to Hard Money Guide, a comprehensive resource for those looking to secure funding for real estate projects.

Author: James Whitmore
Article Source: EzineArticles.com
Video news

The mutual-fund industry fleshed out a plan for a private backstop to money-market funds, rejecting alternatives considered by U.S. regulators that include abolishing the funds’ stable $1 net asset value.

View full post on Finance Stories

Brian T. Moynihan spent his first year as Bank of America Corp.’s chief executive officer putting out fires smoldering from the financial crisis. In 2011, he’ll do it all over again.

View full post on Finance Stories

There are a lot of different loan options out there that you may not be familiar with. Balloon loans, bridge loans,  and many, many more loan types are out there, each offering a different set of advantages and disadvantages, each one potentially just what you’re looking for. If you’re thinking of taking out a mortgage, it may be best to learn a little bit about the alternate options you can choose from before settling on a loan type.

Hard Money Loans

A hard money loan is a type of asset-based loan in which the borrower uses the value of his or her real estate in order to secure a loan. That is, the collateral for the loan is the property itself. Such loans are rarely given by traditional lending institutions, for a number of reasons. These loans are similar to bridge loans, with a few key differences, notably that bridge loans often apply to real estate properties which are in transition. Hard money loans are often used to avoid foreclosure or bankruptcy.

One of the major benefits of this type of loan is that credit score is virtually irrelevant. Because the loan is guaranteed by the property itself, the lender is less interested in your credit history. Additionally, such loans have a low loan-to-value ratio as an added benefit to the lender. A loan-to-value ratio describes the amount of money loaned to the value of the collateral. Usually, a hard money loan has a loan-to-value ratio of about 60% to 70%. If you had a ratio of 65%, then a property valued at $100,000 would guarantee a loan of $65,000.

This lending business took a hit in the late 1980s as the real estate market collapsed, partially due to the overestimation of the value of properties used as collateral in such loans. Because of this, the loan-to-value ratio was lowered significantly to allow for added security to the lender. Hard money loans are largely unregulated, and are provided by commercial lending firms rather than traditional lending institutions.

Because of all the different options out there, and the relative riskiness that can go along with some of them, it can be a good idea to talk to a loan expert before making a decision. For more information about the property loans, visit http://www.mortgagemodificationmaryland.com

Joseph Devine

Author: Joseph Devine
Article Source: EzineArticles.com
Advice on AdSense

Dallas, TX, United States (AHN) – U.S. State District Judge Bruce Priddy allowed two groups of investors to claim $115 million against former Canadian developer Eric Brauss.

Judge Priddy allowed the U.S. investors to claim $65.3 million against Brauss and the Nixdorfs $49.5 million.

Brauss owned the Windsor Speedway and Today Management and then left Windsor in 1990 for Dallas.

His Canadian companies developed 60 plaza, strip malls and office buildings in Ontario. His business in Texas prospered so much that by 2008, Brauss’ net worth reached $28 million.

However, reports said Brauss – who originally is from Germany – fled to Brazil in 2009 after he was accused of diverting millions from his company’s real estate projects into his personal accounts or other firms he owned.

Despite the large amount of claim Priddy allowed, the investors may not be able to wholly collect their money because only a fraction of Brauss’ partnerships have much value, the receiver overseeing Brauss’ companies said.

Brauss’ lawyer admitted his client – who also reportedly owes $750,000 to different Las Vegas casinos – will no longer return to the U.S., but maintained the developer left with his personal money only.

Earlier this year, Dallas resident Doug Barnes got a $35 million judgment against Brauss. Barnes, owner of a national chain of eyewear stores, was the largest individual investor in the real estate developer.

View full post on Economy, Business And Finance Stories

One of the best scenarios for commercial hard money loans is when the borrower has an opportunity that he knows he will make a substantial amount of money on, needs to move on it immediately, and regardless of the fees the hard money lender charges. With this scenario the profit the borrower will make will easily offset the fees the borrower has to pay to the commercial hard money lender.

Commercial Hard Money Loan – Scenario 1

For example, we have recently worked with a borrower that had an opportunity to purchase a fleet of trucks for his business at a 50% discount. Total purchase price on the trucks was just over a million dollars with a value over $2,000,000. On the commercial hard money loan the borrower had to pay 3% in fees in order to get the loan or $30,000, to be able to save over a $1,000,000 of needed trucks for his business. He collateralizes the commercial hard money loan with his building and was able to close in 3 weeks. So $30,000 in fees to save over a $1,000,000…

Commercial Hard Money Loan – Scenario 2

Another similar example is when a borrower wants to purchase a property from a distressed seller at a substantial discount. Typically the seller can’t wait 60 to 90 days to close a conventional commercial real estate loan and instead needs to close in a few weeks or will not offer the discount.

So say the property is really worth $2,000,000 but the seller has agreed to $1,500,000 a $500,000 discount. The buyer would get a commercial hard money loan at 60% of the purchase price or a loan amount of $900,000 and pay say 5% or $45,000 in fees to the commercial hard money lender. So the borrower would save $455,000 by taking advantage of the opportunity. In this case most borrower wouldn’t care (at least that much) about paying the commercial hard money lender their points because of the amount of money they make off the deal.

In general these type of scenario are much easier to close than the bankruptcy/company turn around/debt consolidation type situation. Many commercial hard money lenders no longer look at deals like this.

Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan. He has a STORE for commercial loan brokers. Contracts, spreadsheets, books, etc. Products starting at $4.95! Check it out commercial real estate loans or Commercial Hard Money Loans

Author: Jeff Rauth
Article Source: EzineArticles.com
Import duty tariff

You’ve found a great opportunity to make some money. You’ve heard about hard money bridge loans but you don’t know what to expect? Here are some of the basics:

The biggest advantage of a bridge loan is the lenders are always concerned about the value of the property, not so much you personally. In other words; the property is what secures you the loan not your current credit status. It’s all about the value of the property.

The life of a bridge loan is approximately one to six-months; although you can get an extension of up to 2 or more years. Again, these lenders are not your average banks. The flexibility of this type of loan is why you will either get approved (or not) in as little as 2 days.

You may be asked by the lender why are you looking for a hard money loan instead of a traditional loan? There are many reasons why someone may consider using hard money loans. Most likely your response will be because you need the money now and not three months from now when the window of opportunity has most likely closed, or you may respond that your credit has some blemishes, filed recent bankruptcy, low occupancy levels, etc.

Some of the things your hard money loan lenders want to know will be: the type of collateral, the location and approximate value of the property, the amount owed and most important, the exit strategy of the loan or how will you pay the lender back.

Most bridge loan firms want your business and will work with you to get you 60% – 75% financing. (In some cases you can get 100% financing if you have additional assets to put into the deal.) In 99.9% of most cases, the hard money lenders are private companies, and you won’t typically get 100% of the value of the property. The low loan to value is in place to protect the lender in case of default on the loan.

Be prepared though, the interest rate on hard money loans is much higher than on traditional loans. Expect 10 to 15%, depending upon the overall risk. There will also be points or origination percentages that range between 1 and 5% of the loan amount set forth by the lender and assessed at the close of the deal. However, the higher interest rates, flexibility, and the quick turn-around often offset all the paperwork and time involved with traditional banks.

Some hard money lenders charge a fee for pre-payments, some charge an exit fee for the loan and others charge nothing. Make sure you know exactly what the terms of the proposed loan are before engaging any lender. A detailed letter of Intent is an excellent way for you and the hard money lender to understand exactly what is expected by each party.
One more thing, if you are not familiar with bridge loans do some in-depth research first. Talk to others who have experience with hard money bridge loans or ask your lawyer for some help. Don’t forget, there is plenty of information on the web that you can use to your advantage.

Are you looking for the best deals and rates on bridge loans? Visit http://directmoneylenders.com/ today for more information!

Author: Scott Bowens
Article Source: EzineArticles.com
Advice on AdSense

Private loan money is most often referred to as hard money, and usually the loan comes from a source that specializes in structuring such loans. More often than not a hard money loan will consist of a first mortgage on a residence thus creating hard money residential loans. There are a number of identifying factors involved in private loan money that will be referred to as a hard money loan.

For instance, as mentioned it is usually a first mortgage. Because the borrower’s credit does not matter as much as the amount of equity in the property, a first will in effect prevent a possible loss of the entire property if, for instance, another loan is “ahead” of the hard money loan. The reason why the borrower’s credit does not matter much for private loan money is that the lender looks to the property for its security, and the lender is also being paid dearly for the chance that the lender is taking by basing all the money on the property value alone.

You see, another facet of a hard moneylender is the fact that they usually charge very high interest rates as well as high points. At times, if the property is secure enough, those high points will be rolled into the actual loan. Often the loan is not paid in the typical Principle + Interest (PI) but more than likely is interest only with a balloon at the end of the stated loan period. In this manner, in effect, the borrower is paying interest on interest, since points are interest, and since the mortgage may have been calculated including the points, then every payment the borrower makes, paying interest only, is actually interest on interest.

Generally, most hard moneylenders want a careful appraisal of the property. This is again used as part of the protection that the private loan money lender desires. The lender will look at the Loan to Value Ratio (LTV), which is the percentage amount that the loan will be against the current value of the property. For instance a 70/30 LTV on a property appraised at $100,000 means that the lender would lend $70,000 against that property.

Taking this example further, let’s assume that the hard money residential loan on the property is $70,000 and the deal will bring the lender 5 points at a 12% interest rate, payable interest only. The loan is due and payable in its entirety in 2 years.

5 points is equal to $3,500. ($70,000 X.05), and at 12% a year, the lender would receive payments of ($70,000 X.12 = $8,400 per year divided by 12 months= $700 per month) $700 each month for two years. Remember that points are collected at closing when the loan is actually made. Thus in interest only the lender will make $3,500 + $8,400 + $8,400 = $29,300 in just two years. Perhaps you can see why individuals liked to make hard money residential loans!

However, with property values falling so quickly many hard money lenders took quite a beating. With a loss of approximately 40% of the value originally appraised for, the lender now must also go through foreclosure, which is going to cost the lender at least $8,000, plus eviction proceedings costing about $1,000, and they still must bear the costs of repairs on the house which the evicted owner may have completely trashed, as well as any unpaid taxes.

Florida Home Loan Service can made your dreams of owning your own home become a reality. We offer the following options: Florida Rent to Own, Florida Lease Options, and Florida Owner Financing. You do not need good credit or a bank loan to become a home owner all you need is proof of income, and 3%-5% down payment.

At Florida Home Loan Service we find you that home that will just make your day all you have to do is call Suzie at 352-213-3424 and let us know what you kind of home are looking for and in which areas. Areas that we service in Florida, Alachua, Archer, Gainesville, Bronson, Chiefland, Cedar Key, Dunnellon, Ocala, Miami and Broward Counties.

Author: Suzie OConnor
Article Source: EzineArticles.com
Excise Tax

Washington, D.C., United States (AHN) – The decision by the United States Federal Reserve to pump $600 billion into the nation’s economy by buying U.S. Treasury Bonds has sparked international criticism led by Germany and China.

China and Germany represent the world’s second- and fourth-largest economies respectively. In addition, they were joined by Brazil and South Africa in criticizing the “quantitative easing.” Quantitative easing is the economic term for buying assets to attempt to boost the economy and lower unemployment.

However, Germany, China, Brazil and South Africa allege that the scheme will not help the U.S. economy and will instead create more problems in the rest of the world. Quantitative easing is expected to lower the value of the dollar, which will make U.S. exports cheaper in world markets.

That means that U.S. exports would be more competitive against German and Chinese exports.

Indeed, the dollar did plunge in value against several of the world’s currencies on Thursday.

Germany’s Finance Minister Wolfgang Schaeuble on Friday said the U.S. Federal Reserve’s move would undermine efforts to create a level playing field in the currency markets.

China Central Bank chief Zhou Xiaochuan said the U.S. should focus on reforming the international currency system. He argued that if the U.S. central banking policy is good for the U.S., but not good for the rest of the world that it might have a negative impact on the rest of the world.

The U.S. has criticized China for artificially keeping its currency devalued for many years to make its exports cheaper. But China made that move when its country had full employment and a budget surplus. The U.S. central bank is not buying U.S. Treasury bonds to deflate the value of the dollar abroad but rather to try to pour money into the American economy – which currently has a budget deficit – and to stimulate the weak economy to encourage American businesses to hire unemployed American workers at a time of continued high unemployment.

Germany also criticized the move because they said it would add to America’s deficit.

View full post on Economy, Business And Finance Stories

Boston, MA, United States (AHN) – Two investors of Genzyme Corp. are suing the biotechnology company for rejecting an $18.5 billion takeover offer from Sanofi Aventis.

According to Bloomberg, the investors have filed a lawsuit in a Boston court accusing Genzyme of depriving investors the right to “to receive maximum value for their shares.”

Sanofi began a hostile takeover of the Massachusetts-based company early this month. The French pharmaceutical giant made a non-binding offer in July to acquire all of Genzyme’s outstanding shares of common stock for $69 per share.

Genzyme chief executive officer and board chairman Henri Termeer had deemed the price too low and called the offer “opportunistic.”

Termeer had sought a better offer, citing Genzyme’s plans to reduce costs and raise production, and the firm’s outlook for its multiple sclerosis drug, alemtuzumab, as well as for Cerezyme, which is for patients with Gaucher disease, and Fabrazyme for those suffering Fabry disease.

Genzyme’s board last week unanimously rejected the latest proposal from Sanofi because the bid is “based on identical financial terms to two previous unsolicited proposals.”

“The offer fails to compensate shareholders for the value of Genzyme’s existing business, which delivered compound annual revenue growth of 23 percent from 2002-2009,” the board added. “The offer price does not adequately compensate Genzyme’s shareholders for the strategic importance and financial benefit to Sanofi-Aventis of a potential transaction with Genzyme.”

The board urged shareholders not to take action, saying a program had been initiated to inform them of “intrinsic value of the company.”

Sanofi insists the amount represents a premium of 38 percent over Genzyme’s unaffected share price of $49.86 on July 1. The drug maker also said discussions with shareholders who own more than 50 percent of Genzyme revealed that shareholders were “frustrated” with the biotech firm’s “persistent refusal to have meaningful discussions.”

Genzyme is one of the world’s largest biotech companies. Founded in Boston in 1981, it specializes in producing drugs for rare genetic disorders, transplant and immune diseases, and cancer.

View full post on Economy, Business And Finance Stories