Hard Money Loans

Using Hard Money to Fund a Construction Project You are ready to start construction, but the loan process is slowing you down. You should consider obtaining a hard money loan to get going on your project today. Hard money loans can be obtained quickly and with little upfront cost to you. What are hard money loans and how can I obtain one? Hard money loans are a type of real estate loan that is provided by private investors, through brokers. The collateral for this type of loan is the value of the property. In the case of a construction loan it is the improved value of the property. In order to provide security to the lender, the hard money loan will have higher interest rates than a conventional loan, and will be limited to around 65% of the improved value of the property. The lender will also only lend from the first position, so that in the event of a foreclosure, they are the first party to recover their investment. Hard money loans are short term loans, so you need to have an exit strategy before obtaining one of these loans, such as a plan to sell the property when completed or to refinance the property through traditional institutions.

Although the loan is limited to 65% of the improved value of the property, construction loans will generally cover all of the costs of construction, assuming that costs for construction are less than the value of the property upon completion. If you have a business that is growing at a rapid pace and you are ready to expand by constructing a new building or updating your current building. Obtaining enough capital to obtain traditional financing for this construction can take a while. In this case, it would be worthwhile to pay a higher interest rate for a hard money loan, and be able to start construction within days. Hard money lenders are available all over the country; a web search will turn up many lenders available in your area. Several websites will give you access to multiple lenders. Before approaching a lender, have your plan in place. Have complete details on all of the costs associated with the construction project, an appraisal of the completed property, as well as details on your exit strategy. Provide this information to the lender(s), and you should receive approval within a day or two, and be able to close on the deal within a week.

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by: Hard Money Bankers, LLC www.hardmoneybankers.com

Using Hard Money to Fund a Construction Project You are ready to start construction, but the loan process is slowing you down. You should consider obtaining a hard money loan to get going on your project today. Hard money loans can be obtained quickly and with little upfront cost to you. What are hard money loans and how can I obtain one? Hard money loans are a type of real estate loan that is provided by private investors, through brokers. The collateral for this type of loan is the value of the property. In the case of a construction loan it is the improved value of the property. In order to provide security to the lender, the hard money loan will have higher interest rates than a conventional loan, and will be limited to around 65% of the improved value of the property. The lender will also only lend from the first position, so that in the event of a foreclosure, they are the first party to recover their investment. Hard money loans are short term loans, so you need to have an exit strategy before obtaining one of these loans, such as a plan to sell the property when completed or to refinance the property through traditional institutions. Although the loan is limited to 65% of the improved value of the property, construction loans will generally cover all of the costs of construction, assuming that costs for construction are less than the value of the property upon completion. If you have a business that is growing at a rapid pace and you are ready to expand by constructing a new building or updating your current building.

Obtaining enough capital to obtain traditional financing for this construction can take a while. In this case, it would be worthwhile to pay a higher interest rate for a hard money loan, and be able to start construction within days. Hard money lenders are available all over the country; a web search will turn up many lenders available in your area. Several websites will give you access to multiple lenders. Before approaching a lender, have your plan in place. Have complete details on all of the costs associated with the construction project, an appraisal of the completed property, as well as details on your exit strategy. Provide this information to the lender(s), and you should receive approval within a day or two, and be able to close on the deal within a week.

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by: Hard Money Bankers, LLC www.hardmoneybankers.com

Using Hard Money to Fund a Construction Project You are ready to start construction, but the loan process is slowing you down. You should consider obtaining a hard money loan to get going on your project today. Hard money loans can be obtained quickly and with little upfront cost to you. What are hard money loans and how can I obtain one? Hard money loans are a type of real estate loan that is provided by private investors, through brokers. The collateral for this type of loan is the value of the property. In the case of a construction loan it is the improved value of the property. In order to provide security to the lender, the hard money loan will have higher interest rates than a conventional loan, and will be limited to around 65% of the improved value of the property. The lender will also only lend from the first position, so that in the event of a foreclosure, they are the first party to recover their investment. Hard money loans are short term loans, so you need to have an exit strategy before obtaining one of these loans, such as a plan to sell the property when completed or to refinance the property through traditional institutions.

Although the loan is limited to 65% of the improved value of the property, construction loans will generally cover all of the costs of construction, assuming that costs for construction are less than the value of the property upon completion. If you have a business that is growing at a rapid pace and you are ready to expand by constructing a new building or updating your current building. Obtaining enough capital to obtain traditional financing for this construction can take a while. In this case, it would be worthwhile to pay a higher interest rate for a hard money loan, and be able to start construction within days. Hard money lenders are available all over the country; a web search will turn up many lenders available in your area. Several websites will give you access to multiple lenders. Before approaching a lender, have your plan in place. Have complete details on all of the costs associated with the construction project, an appraisal of the completed property, as well as details on your exit strategy. Provide this information to the lender(s), and you should receive approval within a day or two, and be able to close on the deal within a week.

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by: Hard Money Bankers, LLC www.hardmoneybankers.com

Using Hard Money to Fund a Construction Project You are ready to start construction, but the loan process is slowing you down. You should consider obtaining a hard money loan to get going on your project today. Hard money loans can be obtained quickly and with little upfront cost to you. What are hard money loans and how can I obtain one? Hard money loans are a type of real estate loan that is provided by private investors, through brokers. The collateral for this type of loan is the value of the property. In the case of a construction loan it is the improved value of the property. In order to provide security to the lender, the hard money loan will have higher interest rates than a conventional loan, and will be limited to around 65% of the improved value of the property. The lender will also only lend from the first position, so that in the event of a foreclosure, they are the first party to recover their investment. Hard money loans are short term loans, so you need to have an exit strategy before obtaining one of these loans, such as a plan to sell the property when completed or to refinance the property through traditional institutions.

Although the loan is limited to 65% of the improved value of the property, construction loans will generally cover all of the costs of construction, assuming that costs for construction are less than the value of the property upon completion. If you have a business that is growing at a rapid pace and you are ready to expand by constructing a new building or updating your current building. Obtaining enough capital to obtain traditional financing for this construction can take a while. In this case, it would be worthwhile to pay a higher interest rate for a hard money loan, and be able to start construction within days. Hard money lenders are available all over the country; a web search will turn up many lenders available in your area. Several websites will give you access to multiple lenders. Before approaching a lender, have your plan in place. Have complete details on all of the costs associated with the construction project, an appraisal of the completed property, as well as details on your exit strategy. Provide this information to the lender(s), and you should receive approval within a day or two, and be able to close on the deal within a week.

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by: Hard Money Bankers, LLC www.hardmoneybankers.com

Nothing is certain in our economy these days. Many people and businesses are still in quite good shape, but plenty of others haven’t been so lucky, and have had to close their businesses, and have filed bankruptcy or been foreclosed upon. And now, unfortunately, sub-prime mortgages aren’t available for assistance they way they used to be, due to the recent subprime mortgage crisis. It’s become much more difficult to know where to turn when it’s your financial future at stake.

If you’re one of the many, stuck between a financial rock and a hard place (or a foreclosure and a bankruptcy, as the case may be), it may be advantageous for you to look into taking out a hard money loan. Hard money loans are utilized by many people facing foreclosure or similar financial disaster, as the criteria for lending is more relaxed than a conventional loan. While your credit history is still taken into consideration by the lender, it’s typically not judged as harshly because the loan is given based on the value of real estate property you already own. Due to the slightly higher risk to the lender when dealing with hard money loans, they are not provided by banks but rather by private lenders, and as such, the interest rates of these loans aren’t based on bank rates. Typically the interest rate on a hard money loan will range from 15% – 25% (a little less for bridge loans, which are similar, but not necessarily used in times of financial hardship), which means that you probably don’t want to look to hard money loans as sources of long-term financing. The term is, in fact, often fairly short. Decide carefully if you’ll be able to afford the loan, as interest rates upon default may increase to the state limits, as high as 25% to 29%.

Typically the value of a hard money loan is about 65% – 70% of the value of the property. This is known as the LTV (Loan-To-Value). The LTV, on average used to be a bit higher than it currently is, but due to property value overestimation in the 1980s and 1990s, the LTV was lowered, and interest rates raised. Hard money lenders do usually want to be in “first lien” position (this means that their lien would take priority over any others) on a property, so if the value of that property isn’t enough to cover your existing mortgage, the loan would need to be cross-collateralized with another one of your properties. Often, these cases are called “blanket mortgages.”

It’s important to review your financial situation thoroughly when considering taking out a hard money loan, and it might benefit you to talk to a certified mortgage planner before you make the choice to do so. In the right circumstances however, a hard money loan may be what it takes to tide you over, and keep your business from going under.

There are different standards and strategies that real estate investor’s use when evaluating properties. In order for us to get involved with a property, the following standards are judged for the worthiness of any rehab project:
“You should look for the worst house on a decent block”
1) Whether your strategy is to “flip” properties, or to hold them for their rental cash flow, it’s important to be able to draw potential buyers, or strong potential tenants, as quickly as possible. With this in mind, you should look at properties on streets that are maintained properly. This does not limit you to higher end homes. There are many “blue collar” areas that properly maintain the condition of their homes and yards. However, a street that has poorly maintained properties or many vacancies do not lend themselves to fast turn around sales or well suited tenants.
Always remember that this is an investment. You take on a large risk, and a lot of work as a rehabber. No matter how much loving care you put into your property, you can do nothing about the condition of your neighbor’s property.
2) Make certain that there is no structural damage to the property. This could be a fatal blow to your investment!
“You make your money when you buy a property, not when you sell it!”
Purchasing Formula
There are many formulas used for the successful purchase of a rehab project. It’s important to use one. There must always be a comfortable cushion between the purchase price and the selling price of investment property. This cushion price will help you achieve a successful investment, even if you have repair cost over-runs, or hold on to the property longer than you had anticipated. Remember, every day that the property is not sold or rented comes right off your bottom line. The interest, taxes, insurance, and utility bills compound each day. Buying the property at the right price will protect you from Murphy’s Law.
Our Funding formula:
1) Establish an after repair value for your property.
(Get “area comps” and view each one. Pick out the property that has a street that is most similar to your house’s street, and a structure that is closest to your house’s structure, and then compare the square footage, amount of bedrooms and bathrooms that are all listed on the “comps.” This will help establish a real fair market value for your property).

2) Multiply the ARV x .65 (After Repair Value)
(This will give you 65% of the ARV).
3) Establish a comprehensive and accurate list of repairs that you plan to do to the property, and estimate the costs for each repair.
(This is important. If you are knowledgeable and experienced in doing repair work, you may not need help. If you are not experienced or skilled in this, find someone who is and have them draw up a plan. Even if it costs you a little money to get them out there, this could save you thousands of dollars).
4) Subtract the cost of repairs from the 65% value of the ARV. (After Repair Value) This should be the maximum price that you pay for the property! This is a conservative formula, and it usually works well. Remember, anyone can buy a property at close to fair market value, but with your costs and risks, you must do better!
Written by Jim Olivero

A residential hard money loan is a kind of loan in which a borrower gets funds based on the value of a specific commercial or residential real estate. The term hard money refers to the difficulties in acquiring a loan. Hard money loans offer high interest rates and lower loan-to-value ratios, as there is no government institution that backs the lender. The loans are given against the value of real estate collateral.

Residential hard money loans are loans given by private lenders on the basis of the value of the asset or property as opposed to the traditional banking criteria of credit scores, tax returns, and income statements of the borrower. Residential hard-money loans are temporary bridge loans that are provided for acquisitions, refinancing, foreclosures and people who file for bankruptcy. The interest rates for these loans are high, but it is cheaper than taking on a financial partner or filing for bankruptcy.

In general, hard money loans offer interest rates and points that are 50-100% higher than traditional bank loans. This has led to the impression that they are tough to repay. However, hard money loans are considered to be beneficial for people looking for sources to help them get loans, for example, to renovate residential property before selling or renting it.

The hard money lenders usually consider income-producing properties such as apartments, retail or shopping centers, industrial, office buildings, hotels, motels, medical institutions, and restaurants. They also provide loans for non-income producing activities such as land acquisition, development and construction, bank workouts, foreclosures and bankruptcies.

Most private investors look for a safe and secure investment with a return that is better than what they will receive from the bank. As residential hard money loans are secured by a property with usually 30% – 50% equity, the investor is well protected and receives the benefit of the higher interest rate return.

Author: Thomas Morva
Article Source: EzineArticles.com
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According to the Mortgage Bankers Association, nearly a quarter of a million home owners face foreclosures every three months, across America.

Sixty percent of the effected families wish that they knew better about the mortgage they were dealing with. Still, it’s never too late to understand your options in case of a foreclosure.

Hard Money Loans

Hector Milla Editor of the “Best Loan Modification Companies” website — http://www.BestLoanModificationCompanies.com — pointed out;

“…Typically the best option that most are unaware of is getting a hard loan. To many, it is possibly the simplest option to stop foreclosure and requisite. These hard money loans are never offered by the banks or financial institutions. In order to avail these, you will have to look in your local area for private lenders. A legal expert can easily locate such lenders but nowadays nearly every community has at least one private lender who specializes in hard money loans…”

Terms

The private lenders will provide up to 60 to 70 percent of the amount as collateral against the value of your home. A major drawback is that the interest rate will be on a higher side ranging from 11 to 19 percent, in most cases. Furthermore, to safeguard the interest of a lender, the appraised value of the home will be assessed lower than its original market value.

Nevertheless, getting a hard loan is sometimes very beneficial as the home owners not only get the financial help they require but it seldom entails any income or credit evaluation.

“…Before you embark on a journey to financial freedom with hard loans, make sure to consult an attorney. As hard loans are mostly unregulated, an attorney can easily assess the terms of the lender and protect you from any undue claims…” H. Milla added.

Further information about how to get professional assistance with a mortgage loan modification by http://www.BestLoanModificationCompanies.com

Hard money loans are specialty loan products, only taken on by investors who are willing to invest in high risk loans.

The loan to value ratios are low, the interest rates are higher, the points or fees are typically much larger than other mortgage loans, and these types of loans are often due and payable sooner.

Natalia Osorio Editor of the “Loan Modification Foreclosure” website — http://www.LoanModificationForeclosures.com — pointed out;

“…The financing criteria for a hard money loan is often based exclusively on the value of the collateral which is the property being financed, and no or very little consideration is given to a borrower’s credit. This means that even a person in foreclosure whose credit and credit score has severely declined can qualify for this type of loan if there is a sufficient amount of equity in their property that reduces the investor’s risk. The loan to value is 65% or less. This means that if your home has a value of $350,000, the maximum loan amount would be $227,500 which is 65% of $350,000. Hard money lenders really prefer making loans on properties with a loan to value of 50% or less…”

Interest rates on hard money loan to stop foreclosure immediately will be substantially higher than other mortgage loans, often 12% or even greater. Often they are interest only loans so that none of the payments apply to the principle.

In addition, a hard money loan will charge the borrower the maximum amount of points allowed under mortgage law regulations. So expect to pay at least six points or six percent of the loan amount to acquire this financing. Usually the six points plus all other closing costs are included in the total amount of the loan, so you will need some wiggle room in the value of your collateral to cover the loan closing costs as well.

These loans are often amortized over 30 years, but are due and payable within eighteen months to five years.

“…In addition, if you own other property, you are an especially good candidate for a hard money loan to stop foreclosure immediately because these lenders are open to cross collateralizing your other property. This means that other properties of yours would be encumbered in the hard money loan as well…” N. Osorio added.

Because of the small number of qualifying features, as well as the independent nature of these investors, hard money loans can close very quickly and can be excellent to stop a foreclosure.

Further information about how to get professional assistance with a mortgage loan modification by http://www.LoanModificationForeclosures.com

When you need funding urgently but you can’t wait for weeks to search lenders for traditional loans, you can opt for Hard Money Loan.

A hard money loan is a type of borrowing in which a borrower receives loans based on the value of a specific parcel of commercial real estate. This means a loan where the lender approves the loan request by deciding upon the value of and equity in the assets, without spending considerable time traditional lenders spend on documentation and verification of borrower for the same amount of loan. The most important issue in case of hard money loan is that this loan involves much higher interest rate than other categories of loans.

Key Features of Hard Money Loan

While in traditional loans a lender spends considerable amount of money and time on verifying borrower’s credentials, his income, source of income, tax history, credit history etc, in case of hard money loan, lenders avoid the above procedure because the loan amount in hard money loan is based upon the value of the real assets or collateral anchoring the loan, therefore, hard money loan is provided at the least possible time. Hard money loans are also those loans that need to fund quickly and the borrower cannot afford to wait for weeks or months for a traditional lender.

Hard Money Loans: Key Factors

1 Fastest Processing

2 Not linked with borrowers’ credit record, income level, source etc.

3 Can be borrowed even in case of legal & operation issues

4 TERMS: Flexible loan terms between 6 months and 20 yrs

5 LOAN SIZE: £500,000 to £75 million

6 COLLATERAL: Real estate and other fixed or liquid assets

7 Special Situation Financing Structure offered for all type of commercial or residential real estate development that cannot be funded by the more traditional lender

Loan Structure

A hard money loan is provided when the related real estate is offered as collateral and the amount of loan is based on the quick-sale value of the property against which the loan is made. Normally, most lenders fund in the 1st-lien position, meaning that in the event of a default, they are the first creditor to receive remuneration.

The loan amount in case of hard money loan is decided as the a percentage of the quick-sale value of the subjected property. This percentage is called the Loan-to-Value or LTV ratio and typically fluctuates between 60-70% of the value of the property. Value, in this case is determined as ‘today’s purchase price’ This the amount that a lender could reasonably expect to realize from the sale of the property in the event that the loan defaults and the property must be sold in a 1-4 months’ time.Therefore, based on the above, a hard money lender, may structure a loan as follows:

68% Hard Money Loan

18% Borrower equity (cash or additional collateralized real estate)

14% Seller carry back loan or other subordinated (mezzanine) loan

Eligibility: Are you eligible for Hard Money Loan?
It has been seen that hard money loan is ideal for borrowers who are unable to borrow from traditional source. Such borrowers are often surrounded by legal & operational issues. In such cases, hard money loan providers solve the problems and get the property suitable for borrowing from traditional lenders. Though the type of property to be considered as collateral depends upon the lender, normally the following income producing and non-income producing properties are considered suitable for collateral:

Income producing Properties:

Apartments

condo/co-op conversions

retail/shopping/strip centers

mixed use properties

industrial, office buildings

hotels/motels

medical, mobile home parks and restaurants

Non-income producing properties:

land acquisition

development and construction

bank workouts, foreclosures and bankruptcies.

LOAN Amount and Interest Rate

Loan size varies from lender to lender but the normal range is £500,000 to £75 million on different categories of properties. Repayment duration is normally in between 6 months to 20 years. Interest rate is based on various factors such as loan amount, repayment duration, risks involved etc but usually remains in the range of 10%-13% with a low fees starting at 2%.

At time, there are few lenders who provide upto 100% loan but very rarely. Typically for a hard money residential loan, borrower’s 15% equity in land or liquid assets is taken as sufficient collateral. Similarly, in case of commercial property 25% equity is usually taken as sufficient security.

Loan Processing

Processing documents for hard money loan is easier and fast compared to documentation for other categories of loans. One can fill out the online application form from the website of different lenders or can phone these lenders’ representatives who provide fast service on call.

Author: Steve A Clark
Article Source: EzineArticles.com
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