If you're the owner of real-estate whether it is single family home, condo, apartment building or a commercial property, in this economy, chances are that you already know about Hard Money Loan.
Essentially a hard money or a private cash loan is a sub-prime loan. A lender puts more accent on the security rather than your earnings and credit. When you go to a pawn shop to pawn an item, the shop owner does not mind what you do for living, how much you make, and what your credit report is like. He only cares for the value of that time and that too a firesale worth.
In a similar fashion, a private bank, looks more at the value of your real property and how much equity you have in it. If the property is worth 1,000,000 greenbacks and you owe $300,000. You can borrow $200,000 to $300,000 more on it easily. The formula lenders use is known as loan to worth proportion. Mostly it is possible to get a loan up to 60% loan to worth proportion.
Qualifying for this type of loan is less stringent in comparison to a traditional loan especially when it is a non-owner occupied or a commercial property. Debt ratios are liberal and credit score has small consideration. If you had great debt ratios and sound credit score why will you be applying for a tough money loan? Hence if your hard money lender is asking you for your credit score, you want to call someone else.
The Pros are it is fast. In most cases you can get funds as fast as 5 working days. Qualifying, as mentioned above, is far simpler. Without hard money loans lot more folks will lose their properties. Hard cash or private cash loans fulfill a vital need in the society. It's a bridge loan and can be a great relief. It's also called a band-aid loan.
The Cons are it is short term. Often only seven years. Usually it is from one to three years. It is interest only. IR is high, from 10 to 12%. Costs are high. Expect to pay three to 6 points.
Not everybody who gets a loan like this has credit or revenue problem. In this economy, more and more individuals who are license money lender have excellent credit and big salary but somehow can't get a bank or a conventioanl loan for one reason or the other. Banks are taking months to shut a loan.
Money for funding these loans comes from non-public backers; from retirement; hedge funds and Trust Deed Investors.
Essentially a hard money or a private cash loan is a sub-prime loan. A lender puts more accent on the security rather than your earnings and credit. When you go to a pawn shop to pawn an item, the shop owner does not mind what you do for living, how much you make, and what your credit report is like. He only cares for the value of that time and that too a firesale worth.
In a similar fashion, a private bank, looks more at the value of your real property and how much equity you have in it. If the property is worth 1,000,000 greenbacks and you owe $300,000. You can borrow $200,000 to $300,000 more on it easily. The formula lenders use is known as loan to worth proportion. Mostly it is possible to get a loan up to 60% loan to worth proportion.
Qualifying for this type of loan is less stringent in comparison to a traditional loan especially when it is a non-owner occupied or a commercial property. Debt ratios are liberal and credit score has small consideration. If you had great debt ratios and sound credit score why will you be applying for a tough money loan? Hence if your hard money lender is asking you for your credit score, you want to call someone else.
The Pros are it is fast. In most cases you can get funds as fast as 5 working days. Qualifying, as mentioned above, is far simpler. Without hard money loans lot more folks will lose their properties. Hard cash or private cash loans fulfill a vital need in the society. It's a bridge loan and can be a great relief. It's also called a band-aid loan.
The Cons are it is short term. Often only seven years. Usually it is from one to three years. It is interest only. IR is high, from 10 to 12%. Costs are high. Expect to pay three to 6 points.
Not everybody who gets a loan like this has credit or revenue problem. In this economy, more and more individuals who are license money lender have excellent credit and big salary but somehow can't get a bank or a conventioanl loan for one reason or the other. Banks are taking months to shut a loan.
Money for funding these loans comes from non-public backers; from retirement; hedge funds and Trust Deed Investors.
About the Author:
Yanni Raz is a mentor for lots in the Estate Mortgage industry, Yanni Raz is been schooling many homeowners in California about fast loans and help some also to save their homes through loan in sg
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