What is the purpose of hard money?
A: Hard money is typically used as a stopgap measure so the creditor or property can be taken into compliance with traditional lending rules or sold. It’s a short- to medium-term option (1-5 years) for all forms of real estate, including commercial, residential, office, manufacturing, raw property, renovation, land development, multi-family, single-family housing, and manufactured homes.Feel free to find more information at Houston hard money loan.
Why does anyone take out a hard money loan when banks offer lower interest rates and fees?
A: A borrower can prefer private or hard money financing over less costly institutional financing for a variety of reasons, but the following are the most common ones. The most popular explanation is the length of time it takes for a bank to finance a residential loan, 60-90 days for a business loan, and 120 days or more for a renovation or growth loan. Private capital, on the other hand, is usually financed within two weeks, and in some circumstances, as soon as 24 hours.
A property that either lacks cash flow to satisfy bank criteria or needs physical upgrades is another form of project that is ideal for private capital. Banks usually won’t lend a debt backed by a house that has to be rehabbed before it can be used, so the creditor can get a private money loan to buy the property and rehab it, and repay the private money loan with traditional funding. Occasionally, a creditor will buy a commercial property that is vacant. Banks will not lend on those investments, so private money will offer a bridge credit to help the developer buy the property and lease it out. A commercial lender can refinance the private money loan with retail financing until the leases are in operation and have been “seasoned” for at least 12 months. Banks are still barred by statute from making most forms of raw land lending, making private capital the only viable option for raw land financing.
Another consideration is the borrower’s equity in the subject property or other assets he or she owns. Coppercrest Financing http://www.coppercrestfunding.com, for example, makes loans dependent on the property’s valuation rather than the sales price, and can cross-collateralize the debt with other properties, meaning we can sometimes lend the entire purchase price.
What are the costs involved?
A: Difficult Cash Lenders charge a loan fee that is usually between 3 and 5% of the total loan value. Typical lender fees, such as paper planning, loan handling, and application/inspection fees, are also charged. Third-party payments, such as escrow fees, title protection fees, and account servicing fees, are also included. CopperCrest Funding does not charge undisclosed garbage rates, but some lenders do, so read the documents carefully or get it reviewed by an attorney.
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