It’s not uncommon to learn mortgage industry insiders refer to hard money lenders as being a last option. While this can be true to the extent that numerous borrowers who solicit loans from hard money lenders do so as a last option, there are numerous cases in which a hard money lender could be sought before a conventional banking institution. Let’s take 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 Development – Let’s say an actual estate developer has sunk $10 million into a development deal and originally planned to market units in January and would then start to recoup their investments dollars through the project. As is the situation with lots of such endeavors, delays may push back the beginning sales date or perhaps the project could go over budget, leaving the developer using 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 begins to realize a cash positive position. Using a traditional loan, the bank would not push through the borrowed funds for the borrower for 4-6 weeks. The developer would default on his original loan or will not have money on hand to complete the project. The developer needs cash at this time and oftentimes needs the cash for only a two to four month period. In this scenario, a tough money lender is the perfect partner simply because they provides that loan quickly and efficiently.
Rehab Investor – Another illustration of a hard money scenario is really a rehab investor who needs a loan to renovate run down homes which can be non-owner occupied. Most banks would run using this loan since they would struggle to verify that this rehabber will probably be in a position to promptly sell the units to get a profit — especially with no current tenants to provide rent to handle the mortgage. The tough money lender would, most likely, be the only lender willing to battle this type of project.
Flipping Properties – Another group who could use hard money lenders as being a place to start as opposed to a last resort are property investors seeking to “flip properties.” If the investor locates a home they deem to be a great value, they could need fast and secure financing to consider buy, renovate and sell the property quickly. Anyone looking to flip real estate property fails to want to hold onto the property for long periods and the temporary loan from https://www.accreditloan.com/ will accommodate this need. The pdkfqq can be structured as interest only, keeping the expenses low. After the property comes from the individual that is flipping the home, the primary is paid back as well as the profit is kept or reinvested to the next project.
A Borrower In Foreclosure –
One final scenario of hard money involves somebody that finds themselves in foreclosure. After a homeowner falls behind on the house payments, most lenders is not going to provide them with that loan or restructure their current loan. Occasionally, an individual who may be facing foreclosure will get yourself a hard money loan to prevent foreclosure proceedings and utilize enough time to market the house.
The question remains why would hard money lenders loan money when 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 2nd is that hard money lenders require the borrower to have at the very least 25-30% equity in real estate as collateral. This insures that if the borrower defaults on their loan that this lender can still recoup their initial investment.
A tough money loan is actually a married relationship between a borrower in a tough spot (either from a time sensitive perspective or due to their poor financials) and Accredit Money Lender that is risk adverse and is also ready to take a risk to get a higher return. While hard money loans might be a final option for a lot of, there are many scenarios when hard money is the only method to go.