Knowing Hard Money Lenders
Perhaps, you are also liek other investors who are interested on hard money lenders? How can we identify these lenders? What is the meaning of hard money? How do you get the money? Would it be hepful to search financial assistance from these leneders? Here are the basics of hard money lenders. Firstly, you must determine what ‘hard money’ is. For many investors,money could be soft or hard. With soft money, you can enjoy flexible terms and it’s quite easy to qualify. The opposite of that is hard money. Obtaining hard money is restrictive. The terms are strict and more specific. This is common as the funds come from a person who have plenty of money. The money is also called ‘private money’. The lender is an individual and not a lending institution. These people primarily think about their capital investment than any other else. Because of this, they are quite strict. If you’re a lender, you will also do the same thing.
What are the specific terms? Well, the terms vary from one lender to another. Usually, the lenders base the terms on the property or the deal. In many circumstances, the lender is only willing to lend a substantial amount based on the market value of the property in order for them to take benefit from it particularly if it is a foreclosed or sold property. You will need more than just property equity in order to qualify. The laws today favor the consumers. Because of the laws, the lenders are now harsher when approving loan applications.
Before borrowing from a hard money lender, know the terms so that you can find the right lender to meet your needs. In here, you’ll able to know the common terms provided by the lenders. Normally, the lender will offer a loan of the repaired value of about 70%. It translates to the possibility that you can loan at least 70% of the house’s repaired cost. If your home is worth about $45,000 plus a repair cost of $20,000; after repair, the home is already worth $100,000 and so the lender will lend you $70,000.
Another is the high rates of interest. The rates range from 12 to 20% and the payment terms can last for six months to a couple of years. The rates usually depend on the homeowner’s experience and credit score. Expect to pay some closing fees or costs. To use the money of the lenders, you will be charged 2 to 10 points. 1% is equal to 1% of the amount of mortgage. So for a $100,000 loan, 1 point is $1,000. Consider these things when borrowing money from such lenders.
One more thing is the availability of the finances. In terms of properties,you would have to quickly act. If you can act instantly, you can make a difference. You have to have a perfect relationship with lenders immediately. Know the penalties of pre-payment. As you an see,the pre-payment could have a large impact on your revenues. Thus,avoid such penalties.
