The primary factor that most hard money lenders use is the value of the collateralized real estate. Also, this type of loan provides a large variety of fees and interest rates which is why looking around is the most effective way to secure a deal.
A hard money loan is an asset-based loan secured by property and provided by a private investor. Many of these loans are short-term offers that last for one year or less.
Hard money interest rates are usually higher due to the shorter term and most of these loans are applied to projects that last a few months or years. The qualifications for obtaining this type of loan will vary with each lender and loan use.
Hard money lenders will look at the value of the property to figure out if they want to make a loan and which amount they want give. The security for the loan is provided in the property.
The lender has to agree with the property value before determining the amount to lend. An appraisal will find out the value. A lender can give out a loan as much as 70 percent of the value.
Benefits of a Hard Money Loan:
Hard money lending comes with significant fees and high interest rates compared to regular lending but there are still many benefits. These loans are usually more available to borrow when money is hard to come by compared to regular loans.
These loans also require less documentation and will close faster so real estate investors can benefit from deals before others can. Another advantage of this type of loan is it can be used to make money. Some people use foreclosure finance to flip houses and earn significant profit.
Another advantage is the option to refinance a free and clear property and receive up to 50% of the value of the property.
Like many other types of loans, people can obtain financing with good or bad credit. Having bad credit is not a risk for some hard money lenders. Some people can obtain one of these loans quickly and it can close in ten days compared to a period of several months with a bank.
Applying for a Loan
People who decide that getting funds will be suitable for them should take the next step and apply. Since it is a loan, the application process is similar to the one for a regular loan. Borrowers will need to fill in all the information about their property and financial situation.
Those who include honest, relevant information will secure a deal for a loan package more quickly. The process of obtaining hard money funds will work better if borrowers build stronger relationships with private investors and brokers. Having a well-established relationship will make the process easier in the future.
A hard money borrower should use a loan specialist who can provide financing in a range of areas. Blue Funding consists of loan specialists who provide short-term mortgages up to $ 5 million in the state of New York. They also provide hard money, bridge and private mortgage loans.
There are numerous foreclosure finance options available that allow people to receive mortgages for purchased and remodeled property.
A hard money loan is a funding option that is very different from a traditional bank loan. The primary factor that most hard money lenders use is the value of the collateralized real estate.
Also, this type of loan provides a large variety of fees and interest rates which is why looking around is the most effective way to secure a deal.
Article by Roy. Roy is a loan specialist at:?Hard Money Lenders Nyc
Source: http://realestateinvesting.com/blog/2012/02/03/what-is-hard-money-and-how-does-it-work/
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