It’s not uncommon to learn mortgage industry insiders refer to hard money lenders as a last option. While this might be true to the extent that many borrowers who solicit loans from hard money lenders do so as being a final option, there are numerous cases in which a hard money lender could be sought before a traditional banking institution. Let’s take a look at some scenarios where Accredit Licensed Money Lender might be a first stop rather than a final option.
Commercial Real Estate Property Development – Let’s say an actual estate developer has sunk $10 million in to a development deal and originally planned to sell units in January and would then start to recoup their investments dollars from your project. As is the case with lots of such endeavors, delays may push back the start sales date or even the project could go over budget, leaving the developer with a cash negative situation. The developer now have to take out a bridge loan to get through his cash poor period so that you can “survive” up until the project begins to realize a cash positive position. With a traditional loan, the financial institution would not carry on the financing for the borrower for four to six weeks. The developer would default on his original loan or would not have cash on hand to complete in the project. The developer needs cash right now and oftentimes needs the bucks for just a 2 to 4 month period. In this particular scenario, a hard money lender will be the perfect partner since they can offer a loan efficiently and quickly.
Rehab Investor – Another example of a difficult money scenario is a rehab investor who needs a loan to renovate run down homes that are non-owner occupied. Most banks would run using this loan simply because they would struggle to verify the rehabber will probably be able to promptly sell the units for a profit — particularly with no current tenants to offer rent to handle the mortgage. The tough money lender would, in all probability, be the only lender willing to take on such a project.
Flipping Properties – Another group who could use hard money lenders as a starting point as opposed to a last option are real estate investors seeking to “flip properties.” If the investor locates a house that they deem to become a great value, they might need fast and secure financing to adopt buy, renovate and sell the house quickly. Anyone seeking to flip real estate property fails to wish to hold onto the property for a long time as well as the short-term loan from https://www.accreditloan.com/ will accommodate this need. The pdkfqq may also be structured as interest only, keeping the costs low. Once the property comes through the individual who is flipping the house, the principal pays back and also the profit is kept or reinvested in to the next project.
A Borrower In Foreclosure –
One final scenario of hard money involves someone who finds themselves in foreclosure. When a homeowner falls behind on the house payments, most lenders will never provide them with financing or restructure their current loan. Occasionally, someone who is facing foreclosure will obtain a hard money loan to avoid foreclosure proceedings and use time to sell the property.
The question remains why would hard money lenders loan money in case a traditional bank wouldn’t even consider this kind of g.amble. The reply is two fold. First is very difficult money lenders charge higher rates than traditional finance companies. The next is the fact that hard money lenders require borrower to get at least 25-30% equity in actual estate as collateral. This insures that in case the borrower defaults on their own loan the lender can continue to recoup their initial investment.
A difficult money loan is basically a married relationship from a borrower in a tough spot (either from the time sensitive perspective or due to their poor financials) and Accredit Licensed Money Lender who is risk adverse and is also prepared to take a chance to get a higher return. While hard money loans can be a last resort for most, there are numerous scenarios when hard cash is the best way to go.