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| > BAD CREDIT LOANS | > HARD MONEY LOANS | > BAD CREDIT MORTGAGES | > CALIFORNIA BAD CREDIT LENDERS |
:: Hard Money Loans |
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Hard Money Loans DefinedA hard money loan is a non institutional loan made by a private lender that specializes in hard money lending, or private fund that typically lasts anywhere from 2 to 18 months and carries a higher APR than a traditional loan. Hard money residential loans carry a heavier burden and interest rate for the borrower for the simple reason that they also pose higher risk for the lender. Hard money loans typically require that the borrower have 25-50% equity or collateral in another piece of real estate (although some lenders will accept other assets such as stocks and bonds as collateral for the loan).
Hard Money Loan Positions Many hard money lenders will only lend on the first mortgage (in the industry this is known as being in the 1st-lien position). If the borrower should default on the loan, the hard money lender is the first creditor to be paid when the property is sold. Some hard money lenders will subordinate to another 1st lien position loan; these loans are known as HELOC loans or second lien position loans. This is a riskier position for the lender as they are the last creditor to recieve remuneration. Loan to Value on Hard Money Loans Hard money lenders structure loans based on loan to value (LTV). The LTV for most hard money loans will not exceed 75% of the value of the property. For the purposes of determine an LTV, the word "value" is defined 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. |
