Today, people can choose from a wide range of options for borrowing money. There are countless lenders, including banking facilities, varied financial institutions and even private investors who specialize in lending money and writing loans. Though money lending and/or borrowing is a common occurrence every day, there is one money lending option, that of hard money lenders, which is not only somewhat new, but to some can be a bit confusing and hard to understand. With that said, hard money lenders, typically private investors, both individuals and small groups, lend money to borrowers based on the property that is being purchased rather than on assets and income.
Real estate investors who choose to engage in Hard Money Loans encounter terms, language, and scenarios that they do not understand as they embark on their new lending options. One type of investment option that presents abundant questions to investors who lack appropriate knowledge is that of hard money lending. A concept and option that is still new to real estate investing, Hard Money Loans are fast becoming one of the most favored forms of real estate lending across the globe, primarily for short term borrowing.
Hard Money Loans do not give consideration to credit scores or overall debt, nor to total income or the value of assets, but rather are focused only on the value of the property that is being purchased. Hard Money Loans present with higher percentage rates than those of regular loans or conventional mortgages. As a matter of fact, the percentage rates may be as much as twice the amount of a conventional mortgage with very high origination fees as well.
Hard money is used by many individuals, such as developers and house flippers, to fund property deals. This is primarily because they can many times borrow as much as 100% of a purchase price. Though this is attractive in and of itself, there are some hard money lenders that require borrowers to use real assets as collateral for their loans whether the loans are short term or long-term.
There are many benefits and features to Hard Money Loans that make the decision-making process an easy one for real estate investors. One of the most attractive features Hard Money Loans afford is the simple fact that they can be easily accessed. In addition, unlike conventional mortgages and other types of loans, Hard Money Loans cut right through all the red tape and can be turned around in a much faster turnaround time, sometimes in just a matter of days rather than several weeks as is the case with many other types of loan options.
Reaching out to a local Los Angeles Hard Money Lender affords L.A. borrowers the opportunity to acquire their needed funds within just a matter of days, in some instances, and may even omit appraisal costs and other typical costs with the exception of origination fees.
Hard Money Loans are funded with varied requirements and different protocols. Some lenders may charge lower interest rates and varied origination fees over a specific period of time. This same lender may only write a certain number of loans per year. On the other hand, another hard money lender may not charge any points at all, use a commitment letter rather than origination fees, charge higher interest rates and is a whole lot more particular and detailed when it comes to protocol and guidelines. Regardless of the rules and requirements a hard money lender may have, the bottom line is that the funds are there and can be in your hands for use in just a matter of days.
A benefit worth mentioning yet again is the fact that Hard Money Loans are not based, for the most part, on your credit score or on your assets and income. This is beneficial to those borrowers who have had credit score issues in their past, have been declined by other lenders, and are unable to verify income and is especially true with local lenders. Further, when borrowing money from a hard money lender you do not have to deal with an entire processing team, but rather you deal directly with a specific lender. If your lender determines that you are a candidate for the loan and approves your loan request, then the loan and the money are yours instead of having to deal with a committee of individuals that have to process your loan and perform the whole underwriting procedure.
With this simple explanation of Hard Money Loans it would seem only practical that these types of loans are ideal for short term flips or for initial purchases, but are not the best plan of action for any type of long term investments for either the borrower or the Los Angeles Hard Money Lender.