Hard Money and Bridge Loans For Real Estate

February 8, 2010 · Posted in Alternative Financing · Comments Off 

Although the hard moneylenders were largely affected when real estate industry crashed in the 80’s, recent credit crunch has brought more business to this sector. People who are in need of loans are turning towards hard money loans after the financing by traditional lenders and banks has come to a halt. The casualness and irresponsibility of these banks and lenders when giving out loans in the past has hit them hard and they are going through a severe liquidity crisis. With this serious drop in supply for finances, hard moneylenders are seen as a reasonable alternative. People and businesses are short of funds, and naturally they have to go for the best substitute available. A hard money loan comes as a last resort in such situations.

Characteristics of a hard money loan:

Hard money loan goes by the principles of mortgage; the distinguishing characteristics are the interest rate and the time consumed in approval. A loan application can take quite some time before getting through all the procedures and verification process that are part of a bank policy. Whereas hard money loans are issued normally by private lenders (though you can find many commercial hard money lenders as well) in relatively short time at higher interest rates and lower loan to value (LTV) ratio. The interest rate or loan to value ratio is not fixed and it keeps changing with the ups and down of real estate market. Hard money loans are often for short period of time (also known as bridge loans) that means the correct quick-sale valuation of the property is vital for the lenders.

Some tips for the borrowers and lenders:

As a borrower, you need some extra efforts to convince hard money lenders (these extra efforts are compensated by their fast approval time, once they are convinced), a hard money lender will believe you more if you are ready to put your cash into the deal as well. This is why they emphasize on low LTV ratio more than your previous credit score when compared to traditional lenders. Along with the advantage of their availability in even hard financial times, they are a much better option when you need quick finance. Being a lender, you should be extremely careful when determining the current value of property. Over estimation or wrong valuation can cause you serious loss in case of default. Also borrowers should try to reach hard moneylenders themselves, without bringing too many agents and brokers in between, as it will save them lots of upfront costs and expenses.

Author: William King
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Residential Hard Money Loans Are Easier To Obtain and Can Be Approved Quicker Than Traditional Loans

January 11, 2010 · Posted in Alternative Financing · Comments Off 

For anyone seeking residential hard money loans, time is of the essence. The major reason that people seek this kind of unconventional financing is because banks simply take too long, or they are unable to meet the increasingly strict criteria that the lending institutions put forth.

There is some confusion over what the money can be used for. One reason for the confusion is that lenders and brokers use different terminology. In some cases, they mean to confuse the borrower. In others, they simply forget that everyone is not as “savvy” as they are. Below, you will find some common terms used by financers and what those terms usually mean.

Acquisition loans are hard money home loans used to purchase a property. The amount available will vary depending on the lender. It is usually a percentage of the appraised value. Commercial banks typically require that you have around 20% of the purchase price. Else, they will charge a higher interest rate. Private lenders may be able to finance the entire amount and the closing costs are usually lower.

Construction loans may be used to build a residence, but they can also be used for repairs, expansions or upgrades. Current homeowners or real estate investors may be interested in these types of hard money home loans. Conventional lenders typically require that the property in question is or will be your main residence before they will approve financing. Private lenders are usually more flexible.

Mezzanine loans typically refer to residential hard money loans that are similar to second mortgages, but the term may also be used to refer to specific kinds of business loans. Mezzanine loans are short term, typically three years or less. The funds may be used for a variety of reasons, including “buying out” a business partner. The amount that you can borrow depends on the resale value of your home or business, minus the amount of other outstanding loans, such as a first mortgage, in other words, the amount of equity that you have.

Asset based hard money home loans may be used for any purpose, as long as you have collateral or assets to “put up”. Conventional lenders refer to them as secured loans. The primary difference is the time that it takes to complete the loan, but there may be other differences. If you have collateral, private lenders may not be as concerned by your credit score. For conventional lenders, a less than perfect credit score may end up costing you thousands of dollars more, because of higher interest rates, if they will approve the loan at all.

Bridge loans fill in the gap when permanent financing solutions are in the works, but the actual purchase needs to be completed quickly. Bridges may be commercial or residential hard money loans. The funds can be used for practically anything. Depending on the lender, there may be no limit to the amount you can borrow. The funds are made available to you quickly. But, bridge loans are very short term solutions, typically not more than 6-24 months. So, you need to know where your long term financing is coming from.

Both private and commercial lenders might use other terms that you do not understand. The best advice: When you do not understand, ask for clarification. As mentioned above, some lenders simply forget that everyone is not familiar with the “lingo”. If a lender is unwilling to explain something to you fully, then you should probably seek another source for your residential hard money loans.

Author: James Whitmore
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High Risk Business Loans For Bad Credit

December 31, 2009 · Posted in Alternative Financing · Comments Off 

Are you looking for tips and information on high risk business loans for bad credit to be able to get a loan to get the capital you need to start a business?

Then this guide is going to help you find out about your best options, make the best choice, and save the most money in your business loan process.

So What Are High Risk Business Loans?

You know how it is already very challenging to succeed to get your loan if you have a bad credit. Because the first thing that lenders always do is checking your credit history and if less than great, they will reject you.

But if you apply for a secured business loan by offering a large asset like a house to guarantee the loan payback.

But what if you don’t own such a big asset to offer and you have a poor credit. Can you still get your business loan?

The good news is, yes, you can still qualify for high risk business loans.

This is the exact type of loan that is right for you because it doesn’t require you to have a brilliant credit score – unlike other types of business loans.

Also you don’t need to offer any big asset to secure the loan. So it is an unsecured loan which is very easy for you.

When you have a bad credit and no large asset to secure your loan with (like a house), you need to apply for what we call a high risk loan.

When you are getting a business loan for bad credit, here are the two options for lenders you can choose…

1. Private business loan lenders

2. Government lenders

The benefit of choosing government lenders is that they almost always offer cheaper rates and lower interest rates. So you will have to pay less money and will save a lot of money in the long term.

On the other hand, the benefit for using private lenders is that you can find a larger number of them so you have more choices to choose from.

In the end, it is your decision to choose which one fits your needs most and is best for you.

But either way, you should look for a lender who definitely offers high risk business loans which are a type of bad credit loans. Because some lenders offer this type of loan and many don’t.

Author: Alex C Johnson
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A Look at Hard Money Loans For Home Purchase and Residential Hard Money Lenders

December 28, 2009 · Posted in Alternative Financing · Comments Off 

Hard money is a way to secure property in a short period of time then refinance into conventional finance and can provide an alternative source of financing for real estate investors. Conventional institutional lenders will not finance hard, hairy loans and on the other side equity investors demand very high returns and/or shares of profits.

Investors who borrow hard money understand that this type of loan is more expensive than conventional loans. A hard money borrower perceives that the loan’s value extends beyond its cost. Investor rehab loans are particularly easy to find with a number of competitors but at the same time you should watch out for the hard money lenders that are also wholesalers.

The Lenders

Lenders of so-called “hard money” are becoming more common and more accessible: Perform a search for “Las Vegas hard money lenders” and you will discover many results, many for the state of Nevada, specifically. There are even private lenders based online, at your convenience.

Lenders have much stricter criteria these days, and for a good reason. In today’s society, the laws favor consumers, not banks. So lenders turn to look at whether or not the applicant is worth the financing and if the business plan is practical. They can scroll through the list of entrepreneurs and make a selection based on the person they wish to lend money. Most loans when approved are made via credit card or PayPal.

Most lenders ask borrowers to pay a minimum of five percent upfront deposits, as a guarantee. The greater amount of deposit will shrink your interest rates and mortgage payments under most circumstances. Lenders want the loan to be current, not to have to complete a foreclosure. But can you make up the defaulted amount over a period of months?

The Borrowers

Most people apply for hard money loans when they have credit problems, are in default, have had a foreclosure or bankruptcy, have been recently unemployed, or for some reason cannot provide proof of income.

Borrowers are advised not to work with hard money lenders who require exorbitant upfront fees prior to funding. If you feel you have been the victim of unfair practices, contact your state’s attorney general office or the office of the state in which the lender operates.

Some borrowers love to use hard money lenders on all real estate deals. Borrowers of hard money loans qualify based on the value of their property more so than the quality of their credit history. However, there is a market out there that hard money lenders cannot fund. So make sure you do your research right before taking on a hard money loans.

Author: Cebi Moshi
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Hard Money Business Loans Are Ideal For Those Who Need To Move Quickly

November 29, 2009 · Posted in Alternative Financing · Comments Off 

When most of us refer to hard money business loans, we are talking about loans made by private lenders, rather than commercial banks. It may be referred to as “unconventional”, but in some cases it is the best choice. There are many reasons why you might choose to go this route as it offers many advantages for the borrower.

You will not find a listing for hard money real estate loans in the yellow pages. On the other hand, you will see thousands of websites on the internet offering them. You should be very careful. There are companies that ask for up-front payment of fees associated with securing your loan, without any sort of guarantee concerning how long it will take or even if the loan can be made. Lots of people have been ripped off. So, be suspicious and check the company. You want to borrow money, not lose it to a scammer.

The same warnings are applicable for those of you that are looking for any kind of hard money business loans. People who are looking for this kind of financing are often desperate. Con-artists rely on desperation to cause people to “act quickly”, when it is usually best to take at least a little time to make sure that you are getting the help that you need. Because of the scams and the rip-offs, there are some financial experts that question the legitimacy of any kind of unconventional financing. They sometimes even deny that there is a need it.

The truth is that there are private lenders that offer legitimate hard money real estate loans and other services. These lenders fill in the gaps left by conventional banking requirements and red tape. They are typically short-term loans, but can be offered for an extended period of time. There should be no penalty for early repayment. And, the funds are usually available right away, as opposed to the months of waiting that are associated with conventional lending.

Hard money real estate loans work well for the investor that has found a great deal. The seller wants to close quickly. The property needs some work. The difference between the private lender and the commercial banker can make a big difference in the amount of profit the investor walks away with.

First of all, a number of closing costs accompany conventional real estate loans. The costs associated with private loans are lower. Completing a conventional loan will take at least a month, and oftentimes 2-4 months, especially these days. The seller may not be willing or able to wait that long. Another buyer with readily available funds may be just around the corner.

Banks typically will only lend the amount needed to pay the selling price. Private lenders may be willing to add in the estimated costs of repairing the property to insure a higher resale value.

Hard money business loans offer the owner an option to the high interest rates associated with credit cards or bank lines of credit. There are many cases in which a relatively large amount of money is needed quickly. For example, a piece of equipment needed to fulfill a contract breaks down weeks before the contract is to be filled. Delaying the fulfillment of the contract may mean less profit to the business owner.

Charging the equipment on the company credit card might not be an option for a number of reasons. The business owner knows that the income from the contract will be much more than the cost of the new equipment. A private lender offering hard money business loans may be the right choice. The money is usually available quickly and terms for repayment can be negotiated privately.

There are may be other advantages, unique to your personal situation. The ones mentioned here are just some of the major points to consider. The bottom line is, it is harder now than ever before to secure a loan from a bank…why not look into a hard money real estate loan instead?

Author: James Whitmore
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