Hard Money Lenders Provide Loans Even To Investors With Poor Credit
Who and what are hard money lenders? You've probably heard other talking about hard money and may have wondered just what it is and if it's relevant for you. Read on for a simple guide to hard money loans. The negative aspects will be introduced first with the positive apects being explained towards the end.
Hard money lenders are experienced investors and require a good return on their investment. This often causes hard money loans to become a last resort for people investing in real estate. The interest rates can be quite high, making hard money loans an expensive option for funding your real estate deals.
Hard money lenders are third party lenders and unlike the big institutional lenders charge interest rates above market rates. Hard money lenders typically require 5-10 percentage points higher interest rates than private money or conventional lenders. Plus, hard money lenders will typically charge you "points" on a loan which is pre-paid interest thereby making this a rather expensive funding alternative.
So, what is a hard money loan to be used for? First you must understand that they are often for about 65-70% of the ARV (after repair value) of the property. This means you may receive 100% of the purchase price, 100% of your rehab costs, and even have some or all of your closing costs rolled into the loan.
If you are trying to fund real estate investments and have poor credit, hard money loans are a viable option. Hard money lenders take the security of the loan into consideration and do not consider character or loan serviceability. For those who are on a strict time limit, hard money loans are also attractive since there is little to no wait time for approval.
So where do you find hard money lenders? The first place to look is in the "money to lend" section of your local newspaper. The second would be at a meeting of your local real estate investing association. Local hard money lenders will often attend to solicit new business. Finally, don't forget to check online - just search for "hard money lenders" or "hard money loans".
Hard money lenders provide hard money loans for financing real estate deals, although it is one of the most expensive options. They charge 5-10 percentage points higher than conventional money lenders, besides charging "points" which is a prepaid interest on loan. But because these loans are worth as high as after repair value of 65-70% of after repair value of the property, they are easy financing option for renovation. Hard money lending is also beneficial as it is based on security of the loan and provides more flexibility for people with poor credit. You can find such lenders in local newspapers, real estate associations, and on the internet.
Published May 18th, 2007
Filed in Business, Career, Finance, Home Business, Real Estate
