There are times in our lives when we need money urgently. Traditional loans, which take weeks for approval, cannot be taken as an option. It is then that people should turn towards hard money loan. This type of credit has a very simple lending process where the borrower gets money on the basis of the value of their specific property. Therefore less amount of time is taken in verification of the documents and every other considerable object unlike the traditional loans and the loan is approved quickly.??
Hard money loans are usually for short term solutions, and it can be used for all kinds of real estate; retail, raw land, land development, single family homes, commercial, office and etc.??
The only problems with private money loans are high interest rates and short terms. However there are many reasons behind this type of financing. Even though banks grant loans at lower rates, the time for the processing of the credit varies from 40 to 120 days, depending on the type of application. On the other hand, commercial hard money loans can be easily granted within 48 hours. Other reasons could be your financials, tax returns or low credit score. ?If you do not show much income on your tax returns or your property is not stable and doesn?t cash flow enough to service the debt to meet the banks requirement for credit; private lenders are your only option.??
Private lenders are very flexible in regards to their terms. ?Their terms for repayment of the loan can vary from six months to 5 years. The loan size also depends not on their investor and underwriting guidelines but also on the real estate you provide as collateral, so there is no need to worry how much loan would be granted. Your collateral also does not have to be of any fixed kind, it could be any real estate, any fixed or any liquid asset. And for cases that cannot be funded by traditional lenders due to their policies and guidelines, such as loan discount payoffs, private investors have special financing structure, especially designed for those particular cases.??
The interest rates are usually 9%-14%. This rate depends on various factors such as the LTV loan to value ratio, power of the borrower, equity of the borrower and the condition of the collateral. The private lenders also charge a loan fee which can vary from 3% to 5%, of the total value of the collateral. There are also other fees such as document preparation fee, application fee, loan inspection fee and loan processing fee for the lender and escrow, title insurance, account servicing; these however are essentially third party fees and does not at all go to the lenders.??
Eligibility is flexible. Therefore your liquidity, income, credit records or anything as such is unimportant here to be eligible for credit. All that matters for financing companies are the underlying assets that you are pledging as collateral. Application for such loan is simple and similar generic form as conventional loans.? It?s standard practice for all commercial real estate lenders to require basic personal and corporate information as well as financials to be documented in their files.
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