The Basics behind Hard Money Lending
Hard money lending is defined as loans made between an individual, often the owner of a business or property, and a private lender who is unaffiliated with a traditional lending institution. Hard Money simply means that the hard money loan is protected by the "hard" equity in real estate. If you are lacking in financial collateral (equity in your home), or have poor credit, it is nearly impossible to obtain a traditional refinance mortgage loan.
Hard Money Lending Rates
Because the hard money lender knows that the borrower will have the money for a brief period of time, hard money loans are issued at a high interest rate with a high down payment. These requirements have created a bad rep for hard moeny lending. In reality, the borrowers view hard money lending as a savior, often generating upwards of $100,000 in equity from a foreclosure.
Why Would Hard Money Lending Appeal To a Borrower
Here are some of the reasons why an individual would want to borrow from a hard money lender. First off, in order to preventing a foreclosure. Second, if they specialized in buying and remodeling rehab homes. Third, for commercial development or private business ventures. Fourth, to improve their FICO or credit score and then transition into a traditional mortgage loan.
Finding Appropriate Hard Money Lending
If your credit score is below 500, your loan will need to be from a smaller investment firm. Often times, the mortgage officers at the banks are paid solely to tell you “yes,” even if your credit score is below 500. In truth, they have no intention on getting you the loan, and are therefore wasting time that you cannot afford to throw away.