When it comes to asset-based financing for people with bad credit, or people who need money urgently, hard money loans are very popular. These are loans issued by private investors and individuals who see an investment opportunity on this high risk type of lending. The loan is normally secured by the value of real estate property, so individuals who have high value properties can borrow more money.
While most lenders would consider the income and credit score of the borrower, what determines whether or not you get a loan as well as the amount of cash you get is the value of your property. The higher the actual market value, the more money you will get. For instance, a lender who offers a loan to value ratio of 0.7 will give you 70,000 for a 100,000 dollar property.
The interest rates charged on these loans are normally higher than what banks and other mainstream lenders charge. The loan to value ratios are also normally very low. This is meant to compensate lenders for the high risk they take when they decide to lend to distressed borrowers.
Hard money loans are normally best suited for borrowers who have substantial equity in the property. In such cases, the credit facility can be used to settle the remaining mortgage balance when the bank sends a notice of default as the first step of initiating foreclosure proceedings. This will enable the borrower to not only avoid foreclosure, but also get full ownership rights over their property. The property owner can then embark on repaying the loan or sell it at a profit to buy a smaller property after paying off what he or she owes.
When you borrow several loans using the same security, the lenders will always want to get the first lien position. However, this is not possible. Others will have to settle for a junior position. Those who take a second or third lien position may ask for additional security.
After awarding the loan, the lender will expect the money back within the agreed period. This can be a few months up to three years. Repayment can be done through regular installments or a one-off payment after the property is sold. If the borrower defaults in any way, the lender will add a default fee to the outstanding balance. This together with the high interest rate can increase the loan balance exponentially. Therefore, the repayment terms and conditions must be honored to the letter.
Some people assume that these loans are the same as bridge loan facilities. Well, they may have the same qualification criteria, terms and conditions, but they are used in different circumstances. A bridge loan is used for bridging purposes only, but a hard money loan is used by distressed property owners to avoid foreclosure or bankruptcy.
The process of getting a bank loan is far much easier than procuring hard money loans. However, this may be your only option, so you have to go through the process. Working with a reputable lender might make the whole process much easier. When searching for a lender, always use the Internet.
While most lenders would consider the income and credit score of the borrower, what determines whether or not you get a loan as well as the amount of cash you get is the value of your property. The higher the actual market value, the more money you will get. For instance, a lender who offers a loan to value ratio of 0.7 will give you 70,000 for a 100,000 dollar property.
The interest rates charged on these loans are normally higher than what banks and other mainstream lenders charge. The loan to value ratios are also normally very low. This is meant to compensate lenders for the high risk they take when they decide to lend to distressed borrowers.
Hard money loans are normally best suited for borrowers who have substantial equity in the property. In such cases, the credit facility can be used to settle the remaining mortgage balance when the bank sends a notice of default as the first step of initiating foreclosure proceedings. This will enable the borrower to not only avoid foreclosure, but also get full ownership rights over their property. The property owner can then embark on repaying the loan or sell it at a profit to buy a smaller property after paying off what he or she owes.
When you borrow several loans using the same security, the lenders will always want to get the first lien position. However, this is not possible. Others will have to settle for a junior position. Those who take a second or third lien position may ask for additional security.
After awarding the loan, the lender will expect the money back within the agreed period. This can be a few months up to three years. Repayment can be done through regular installments or a one-off payment after the property is sold. If the borrower defaults in any way, the lender will add a default fee to the outstanding balance. This together with the high interest rate can increase the loan balance exponentially. Therefore, the repayment terms and conditions must be honored to the letter.
Some people assume that these loans are the same as bridge loan facilities. Well, they may have the same qualification criteria, terms and conditions, but they are used in different circumstances. A bridge loan is used for bridging purposes only, but a hard money loan is used by distressed property owners to avoid foreclosure or bankruptcy.
The process of getting a bank loan is far much easier than procuring hard money loans. However, this may be your only option, so you have to go through the process. Working with a reputable lender might make the whole process much easier. When searching for a lender, always use the Internet.
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When you need hard money loans take a look at Pacific First National. You will find detailed information on the financing you need, once you visit us at http://pacificafirstnational.com today.
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