to experts when you need funding urgently but you cant wait
for weeks to search lenders for traditional loans, you can opt
for Hard Money Loans.
In simple terms 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.
In an ideal scenario this means a loan where the lender approves
the loan request by deciding upon the value and equity in the
assets, without spending considerable time traditional lenders
spend on documentation and verification of borrower for the
same amount of loan. Theoretically speaking the most important
issue in case of Hard Money Loans
is that this loan involves much higher interest rate than other
categories of loans.
Key Features of Hard Money Loan
While there is no denying that in traditional loans a lender
spends considerable amount of money and time on verifying borrowers
details like credentials, his income, source of income, tax
history, credit history etc. On the other hand in case of hard
money loan, lenders avoid the above procedure because in Hard
Money Loans, the amount 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. Point to
be noted in this regard is that 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 In addition not linked
with borrowers credit record, income level, source etc.
3 Whats more can be
borrowed even in case of legal & operation issues
4 TERMS: In an ideal
scenario flexible loan terms between 6 months and 20 yrs
5 LOAN SIZE: 500,000
to 75 million
6 COLLATERAL: More often
than not real estate and other fixed or liquid assets
7 Furthermore there is
special Situation Financing Structure offered for all type of
commercial or residential real estate development that cannot
be funded by the more traditional lender
It is worth mentioning in this regard that a Hard
Money Loans is provided when the related
real estate is offered as collateral. The amount of loan is
based on the quick-sale value of the property against which
the loan is made. Generally speaking, most lenders fund in the
1st-lien position, meaning that in the event of a default, they
are the first creditor to receive remuneration.
On the other side of
the coin the loan amount in case of hard money loan is decided
as the percentage of the quick-sale value of the subjected property.
Fact remained that this percentage is called the Loan-to-Value
or LTV ratio and typically fluctuates between 60-70% of the
value of the property. If experts are to be believed, value,
in this case is determined as 'today's purchase price' Therefore
it is worthwhile remembering that 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: The question now arises: Are you
eligible for Hard Money Loan Theoretically speaking it has
been seen that hard money loan is ideal for borrowers who are
unable to borrow from traditional source. As a matter of fact
such borrowers are often surrounded by legal & operational issues.
Always remember that in such cases, hard money loan providers
solve the problems and get the property suitable for borrowing
from traditional lenders. Though it is worth pointing that 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:
mixed use properties
industrial, office buildings
medical, mobile home
parks and restaurants
development and construction
bank workouts, foreclosures
LOAN Amount and Interest Rate
Point to be noted in
this regard is that loan size varies from lender to lender but
the normal range is 500,000 to 75 million on different categories
of properties. On the other side of the coin repayment duration
is normally in between 6 months to 20 years. In addition 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%.
In an ideal scenario
at time, there are few lenders who provide upto 100% loan but
very rarely. As a matter of fact typically for a hard money
residential loan, borrowers 15% equity in land or liquid assets
is taken as sufficient collateral. Similarly, it is worthwhile
remembering that in case of commercial property 25% equity is
usually taken as sufficient security.
There is no denying that processing documents for Hard
Money Loans is easier and fast compared to documentation
for other categories of loans. Believe it or not 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.
In simple terms a hard
money commercial loan is an advance for a commercial venture
for which conventional funding is not available. In other words,
one can safely say that it is money that is difficult to get
elsewhere. According to experts the purposes for which such
loans can be obtained include investments, property acquisitions,
construction, business and industry, refinancing and a lot of
More often than not suitable collateral is required for obtaining
a Hard Money Loans commercial
loan. In addition the third party appraisal on the collateral
may not be necessary.
1. boat loans
Buying a boat is major financial decision that a person takes. Buying a boat is not an easy task. There are many...
2. instant cash loans
There is no denying that life is full of uncertainties. If experts are to be believed you never know when an eme...
3. student loan consolidations
Student Loan Consolidation: the Five important issues.With the educational costs going beyond the affordability ...