A hard money loan is an asset based loan collateralized by one or more assets (usually real estate). The interest rate is usually higher than a traditional/conventional loan, like one received from a bank. The reason for this is the lenders unique ability to close fast and in some cases credit is not a factor. Generally LTV (Loan to Value) is the determining factor in whether a hard money loan will be funded or not. Most lenders prefer to fund in a first lien position, which means that in case of a default they will be the first lender to receive honorarium.

Hard money lenders are similar to private money lenders in the fact that their funding capital is usually derived from a network of wealthy, private individuals, or companies. This pool allows them to be very liquid and enables them to fund a variety of investments.

Now that I understand, how do I use it?

Cash flow is the life blood of the real estate industry. If an investor wants to be in the position to take full advantage of real estate opportunities, he/she needs to be either cash rich, or have access to large amounts of capital. And have access to this capital in short notice. Being that most investors are not cash rich the second option is a great alternative.

Hard money can be used to prevent foreclosure, used as a construction bridge loan, or to fund projects that a traditional bank would not consider. Hard money lenders can close fast. Once all paper work is in place a deal can close in as fast as 24 hours. A traditional bank may take up to 6 months to fund. This short due diligence period enables the borrower to act fast on fleeting deals.

To learn more, or to apply for a hard money loan visit http://www.capitalfreedom.net

Capital Freedom is a company based in Utah, and has been doing business for 3 years. We would be more than happy to answer any and all questions you may have. Feel free to submit questions on our site or email us at loans@capitalfreedom.net

Author: Taylor Jarman
Article Source: EzineArticles.com
Smiling shark

The biggest advantage of a bridge loan is the lenders are always concerned about the value of the property, not so much you personally. In other words; the property is what secures you the loan not your current credit status. It’s all about the value of the property.

The life of a bridge loan is approximately one to six-months; although you can get an extension of up to 2 or more years. Again, these lenders are not your average banks. The flexibility of this type of loan is why you will either get approved (or not) in as little as 2 days.

You may be asked by the lender why are you looking for a hard money loan instead of a traditional loan? There are many reasons why someone may consider using hard money loans. Most likely your response will be because you need the money now and not three months from now when the window of opportunity has most likely closed, or you may respond that your credit has some blemishes, filed recent bankruptcy, low occupancy levels, etc.

Some of the things your hard money loan lenders want to know will be: the type of collateral, the location and approximate value of the property, the amount owed and most important, the exit strategy of the loan or how will you pay the lender back.

Most bridge loan firms want your business and will work with you to get you 60% – 75% financing. (In some cases you can get 100% financing if you have additional assets to put into the deal.) In 99.9% of most cases, the hard money lenders are private companies, and you won’t typically get 100% of the value of the property. The low loan to value is in place to protect the lender in case of default on the loan.

Be prepared though, the interest rate on hard money loans is much higher than on traditional loans. Expect 10 to 15%, depending upon the overall risk. There will also be points or origination percentages that range between 1 and 5% of the loan amount set forth by the lender and assessed at the close of the deal. However, the higher interest rates, flexibility, and the quick turn-around often offset all the paperwork and time involved with traditional banks.

Some hard money lenders charge a fee for pre-payments, some charge an exit fee for the loan and others charge nothing. Make sure you know exactly what the terms of the proposed loan are before engaging any lender. A detailed letter of Intent is an excellent way for you and the hard money lender to understand exactly what is expected by each party.
One more thing, if you are not familiar with bridge loans do some in-depth research first. Talk to others who have experience with hard money bridge loans or ask your lawyer for some help. Don’t forget, there is plenty of information on the web that you can use to your advantage.

Are you looking for the best deals and rates on bridge loans? Visit http://directmoneylenders.com/ today for more information!

Author: Scott Bowens
Article Source: EzineArticles.com
Awe Inspiring Pictures

Residential hard money loans are loans given by private lenders on the basis of the value of the asset or property as opposed to the traditional banking criteria of credit scores, tax returns, and income statements of the borrower. Residential hard-money loans are temporary bridge loans that are provided for acquisitions, refinancing, foreclosures and people who file for bankruptcy. The interest rates for these loans are high, but it is cheaper than taking on a financial partner or filing for bankruptcy.

In general, hard money loans offer interest rates and points that are 50-100% higher than traditional bank loans. This has led to the impression that they are tough to repay. However, hard money loans are considered to be beneficial for people looking for sources to help them get loans, for example, to renovate residential property before selling or renting it.

The hard money lenders usually consider income-producing properties such as apartments, retail or shopping centers, industrial, office buildings, hotels, motels, medical institutions, and restaurants. They also provide loans for non-income producing activities such as land acquisition, development and construction, bank workouts, foreclosures and bankruptcies.

Most private investors look for a safe and secure investment with a return that is better than what they will receive from the bank. As residential hard money loans are secured by a property with usually 30% – 50% equity, the investor is well protected and receives the benefit of the higher interest rate return.

Author: Thomas Morva
Article Source: EzineArticles.com
Provided by: WordPress plugin Guest Blogger

Now, about these on the ground evaluators, they are totally independent. They have no idea of how much the property is worth beforehand. We do not inform them of your claim of property’s worth or how much you want the loan. Their basic duty is to visit the property and make a fair evaluation on their own when the property is fixed up. They will calculate its worth keeping in mind property’s market value, repairs and any other factor that may have any implication on its evaluation. Basically, their whole operation is independent. They are neither influenced by us nor informed of your application.

The evaluators came up with an interesting figure. They said the property was worth not more than $45,000 fixed up. This was quite a revelation as the borrower was claiming its worth 100% more than that. The entire outlook of the loan application process changed. Now, we could not approve a loan of more than $17,000 because of depreciation factor in the market along with some other issues. Depreciation of a property is calculated on the following formula: if the value of a property depreciates more than 11% in one year, we have to take the additional percentage off the loan value that we can approve. So, a 20% depreciation means 11% depreciation and 9% off the loan value.

The end result is that we could offer only $17,000 loan whereas the borrower wanted $65,000 on a property we evaluated to be worth $45,000, contrary to the borrower’s claim of $90,000. This is the main problem the real estate investors face. An independent evaluation via hard money loans arizona is the best way to go in case you want to avoid such mishaps.

Although the loan is limited to 65% of the improved value of the property, construction loans will generally cover all of the costs of construction, assuming that costs for construction are less than the value of the property upon completion. If you have a business that is growing at a rapid pace and you are ready to expand by constructing a new building or updating your current building. Obtaining enough capital to obtain traditional financing for this construction can take a while. In this case, it would be worthwhile to pay a higher interest rate for a hard money loan, and be able to start construction within days. Hard money lenders are available all over the country; a web search will turn up many lenders available in your area. Several websites will give you access to multiple lenders. Before approaching a lender, have your plan in place. Have complete details on all of the costs associated with the construction project, an appraisal of the completed property, as well as details on your exit strategy. Provide this information to the lender(s), and you should receive approval within a day or two, and be able to close on the deal within a week.

About Author
by: Hard Money Bankers, LLC www.hardmoneybankers.com

Obtaining enough capital to obtain traditional financing for this construction can take a while. In this case, it would be worthwhile to pay a higher interest rate for a hard money loan, and be able to start construction within days. Hard money lenders are available all over the country; a web search will turn up many lenders available in your area. Several websites will give you access to multiple lenders. Before approaching a lender, have your plan in place. Have complete details on all of the costs associated with the construction project, an appraisal of the completed property, as well as details on your exit strategy. Provide this information to the lender(s), and you should receive approval within a day or two, and be able to close on the deal within a week.

About Author
by: Hard Money Bankers, LLC www.hardmoneybankers.com

Although the loan is limited to 65% of the improved value of the property, construction loans will generally cover all of the costs of construction, assuming that costs for construction are less than the value of the property upon completion. If you have a business that is growing at a rapid pace and you are ready to expand by constructing a new building or updating your current building. Obtaining enough capital to obtain traditional financing for this construction can take a while. In this case, it would be worthwhile to pay a higher interest rate for a hard money loan, and be able to start construction within days. Hard money lenders are available all over the country; a web search will turn up many lenders available in your area. Several websites will give you access to multiple lenders. Before approaching a lender, have your plan in place. Have complete details on all of the costs associated with the construction project, an appraisal of the completed property, as well as details on your exit strategy. Provide this information to the lender(s), and you should receive approval within a day or two, and be able to close on the deal within a week.

About Author
by: Hard Money Bankers, LLC www.hardmoneybankers.com

Although the loan is limited to 65% of the improved value of the property, construction loans will generally cover all of the costs of construction, assuming that costs for construction are less than the value of the property upon completion. If you have a business that is growing at a rapid pace and you are ready to expand by constructing a new building or updating your current building. Obtaining enough capital to obtain traditional financing for this construction can take a while. In this case, it would be worthwhile to pay a higher interest rate for a hard money loan, and be able to start construction within days. Hard money lenders are available all over the country; a web search will turn up many lenders available in your area. Several websites will give you access to multiple lenders. Before approaching a lender, have your plan in place. Have complete details on all of the costs associated with the construction project, an appraisal of the completed property, as well as details on your exit strategy. Provide this information to the lender(s), and you should receive approval within a day or two, and be able to close on the deal within a week.

About Author
by: Hard Money Bankers, LLC www.hardmoneybankers.com

Lenders disburse the money on the basis of the value of property you are buying. They are never concerned about your credit rating. Even people with CCJs, arrears, bankruptcy etc are eligible for hard money loans. So, it is better to look for a hard money loan instead of a traditional loan when you need a comprehensive amount and are in urgency.

Hard money loan is also a good option for those who need money to renovate their property before selling them. Once, your property is renovated, you can raise its market value and then you can easily repay your borrowed amount by selling the property.

Hard money loans come at little higher interest rate as they are meant for people looking to materialize some commercially viable opportunity and also for those who have poor credit ratings. Even then it is a better option to go for than to look for financial partners or to file for bankruptcy. Most of the lenders will offer you loan at a bit higher interest rate and it can be marginally higher than what you get with other traditional loans. It should not be misunderstood that hard money loans are difficult to be repaid. You can use the money to add the value of your property then repayment becomes as easy as any other loan.

Since majority of these hard money loans are disbursed by individual lenders and the approval entirely depends on their discretion .Once you get an affirmation it is a matter of 7-14 days that you can acquire the amount. There is minimal documentation involved and the process need not go through various official steps.

Hard money loans have a timed value of money as they are available when you need some for your commercial transactions. So if you find a lucrative property in offering or you simply wish to add value to your property to squeeze the maximum out of its resale value and you don’t have adequate finance you can opt for hard money loans.

A hard money loan is a type of borrowing in which a borrower receives loans based on the value of a specific parcel of commercial real estate. This means a loan where the lender approves the loan request by deciding upon the value of and equity in the assets, without spending considerable time traditional lenders spend on documentation and verification of borrower for the same amount of loan. The most important issue in case of hard money loan is that this loan involves much higher interest rate than other categories of loans.

Key Features of Hard Money Loan

While in traditional loans a lender spends considerable amount of money and time on verifying borrower’s credentials, his income, source of income, tax history, credit history etc, in case of hard money loan, lenders avoid the above procedure because the loan amount in hard money loan is based upon the value of the real assets or collateral anchoring the loan, therefore, hard money loan is provided at the least possible time. Hard money loans are also those loans that need to fund quickly and the borrower cannot afford to wait for weeks or months for a traditional lender.

Hard Money Loans: Key Factors

1 Fastest Processing

2 Not linked with borrowers’ credit record, income level, source etc.

3 Can be borrowed even in case of legal & operation issues

4 TERMS: Flexible loan terms between 6 months and 20 yrs

5 LOAN SIZE: £500,000 to £75 million

6 COLLATERAL: Real estate and other fixed or liquid assets

7 Special Situation Financing Structure offered for all type of commercial or residential real estate development that cannot be funded by the more traditional lender

Loan Structure

A hard money loan is provided when the related real estate is offered as collateral and the amount of loan is based on the quick-sale value of the property against which the loan is made. Normally, most lenders fund in the 1st-lien position, meaning that in the event of a default, they are the first creditor to receive remuneration.

The loan amount in case of hard money loan is decided as the a percentage of the quick-sale value of the subjected property. This percentage is called the Loan-to-Value or LTV ratio and typically fluctuates between 60-70% of the value of the property. Value, in this case is determined as ‘today’s purchase price’ This the amount that a lender could reasonably expect to realize from the sale of the property in the event that the loan defaults and the property must be sold in a 1-4 months’ time.Therefore, based on the above, a hard money lender, may structure a loan as follows:

68% Hard Money Loan

18% Borrower equity (cash or additional collateralized real estate)

14% Seller carry back loan or other subordinated (mezzanine) loan

Eligibility: Are you eligible for Hard Money Loan?
It has been seen that hard money loan is ideal for borrowers who are unable to borrow from traditional source. Such borrowers are often surrounded by legal & operational issues. In such cases, hard money loan providers solve the problems and get the property suitable for borrowing from traditional lenders. Though the type of property to be considered as collateral depends upon the lender, normally the following income producing and non-income producing properties are considered suitable for collateral:

Income producing Properties:

Apartments

condo/co-op conversions

retail/shopping/strip centers

mixed use properties

industrial, office buildings

hotels/motels

medical, mobile home parks and restaurants

Non-income producing properties:

land acquisition

development and construction

bank workouts, foreclosures and bankruptcies.

LOAN Amount and Interest Rate

Loan size varies from lender to lender but the normal range is £500,000 to £75 million on different categories of properties. Repayment duration is normally in between 6 months to 20 years. Interest rate is based on various factors such as loan amount, repayment duration, risks involved etc but usually remains in the range of 10%-13% with a low fees starting at 2%.

At time, there are few lenders who provide upto 100% loan but very rarely. Typically for a hard money residential loan, borrower’s 15% equity in land or liquid assets is taken as sufficient collateral. Similarly, in case of commercial property 25% equity is usually taken as sufficient security.

Loan Processing

Processing documents for hard money loan is easier and fast compared to documentation for other categories of loans. One can fill out the online application form from the website of different lenders or can phone these lenders’ representatives who provide fast service on call.

Author: Steve A Clark
Article Source: EzineArticles.com
Video news