Here are five important tips to understanding more about hard money.
1. A definition of hard money.
Hard money is a loan that uses real estate as collateral. The usual lending criteria used by banks and traditional lending institutions are not used, allowing someone with poor credit to get this type of loan. The real estate can be land, construction, residential, or commercial. The property is appraised and accepted at collateral if the equity is twenty-five percent.
2. The benefits of hard money.
Hard money is offered at high interest. This is not because the lender is predatory or immoral, but because of the high risk of default. The borrower should not think of this loan as a long term solution to financial problems like an imminent foreclosure of property. Instead, it should be considered a short term solution to hold on to the property and recover money through selling, borrowing, or refinancing on it.
3. The expense of hard money.
On residential real estate, it is 10.5 percent. If it is a second mortgage, the interest rate is even higher, 15 percent. These are rough estimates, and the actual percentage depends on region and the borrower’s equity.
4. Who needs hard money?
Hard money loans are a last resort for many borrowers who may lose their property. A home owner may have his or her house go into foreclosure. A commercial property owner faced with the possibility of having to stop a building project or taking on a partner, may find a hard money loan the best of all possible options.
5. Can hard money lenders be trusted?
Due to the difficulty in getting a loan, not all hard money lenders are genuine. Many charlatans have climbed on the mortgage bandwagon knowing that they are dealing with desperate people. So it is very important to do your due diligence. You must get references from previous clients, do independent research on the lender, and ask a lot of questions. Fees should not be paid upfront until everything is verified.
The Hard Money Team can offer essential information on hard money lending. They can be contacted at 512-692-4195. Call them today for more information. You can also visit their website: www.HardMoneyTeam.com
