Hard Money Loans are typically issued by private investors or companies for projects lasting 3 to 36 months. A Hard Money Loan is similar to a Bridge Loan. Whereas a Hard Money Loan refers to an asset-based loan with a high interest rate, a Bridge Loan is normally used for a commercial or investment property in transition.
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Hard Money Loans may be used in distressed situations. At times, they help property owners to avoid imminent foreclosure or a quick sale; a borrower may save equity and extend the time frame needed to balance his books. Commonly, borrowers look into Hard Money options during distressed financial situations, delinquency on existing mortgages, or midst bankruptcy and foreclosure proceedings.
Hard Money Mortgages are more expensive than Sub-Prime Mortgages. The rate depends on the real estate market and the availability of Hard Money credit. During the past decade, rates have ranged from 12.5 percent to 21 percent. However, the Default Rate may be as high as 25 to 29 percent.
Extra points also make Hard Money Mortgage Loans more expensive for the borrower. In comparison to a traditional loan, Hard Money Lenders charge 1 to 3 points more. Commercial Hard Money Loans may cost much more in points. The rate and fees will vary from lender to lender.
Of course, borrowers must qualify for Hard Money Loans. Criteria vary widely depending on the purpose of the loan as well as the lender. Most lenders base decisions on the value of the real estate being collateralized. They also may consider other factors normally examined during the conventional lending process such as credit scores and income.
The Hard Money loan field is loosely regulated by state and federal laws. It is important that borrowers consult with professional real estate attorneys regarding Hard Money Loans before entering into contract.
For information about creative solutions for rural loans used to develop housing, businesses, industries, and cooperatives, please visit www.creativemortgagefunding.com or call Taylor Mortgage Group LLC at (303) 339-5950 or (303) 884-9393.