If you own property if it is single family home, condo, loft building or a commercial property, in this economy, likelihood is you already know about Hard Money Loan.
Essentially a hard cash or a private cash loan is a sub-prime loan. A bank puts more accent on the security instead of your revenue and credit. When you go to a pawn shop to pawn an item, the shop owner does not care what you do for living, how much you make, and what your credit score is like. He only cares for the value of that time and that too a firesale value.
In a similar fashion, a private bank, looks more at the value of your real property and how much equity you have in it. If the property is worth a million greenbacks and you owe $300,000. You can borrow $200,000 to $300,000 more on it simply. The formula banks use is known as loan to price ratio. In most cases it is possible to get a loan up to 60% loan to worth ratio.
Qualifying for this type of loan is less draconian in comparison to a traditional loan particularly when it is a non-owner occupied or a commercial property. Debt ratios are liberal and credit history has small consideration. If you had great debt proportions and great credit score why will you be trying for a tough money loan? Hence if your hard money lender is asking you for your credit report, you want to call some other person.
The Pros are it is fast. Usually you can get funds as quickly as 5 working days. Qualifying, as mentioned above, is a lot easier. Without hard money loans lot more people will lose their properties. Hard cash or private money loans satisfy an important need in the society. It is a bridge loan and could be a great relief. It's also called a band-aid loan.
The Cons are it is short term. Often not more than 7 years. Mostly it is from 1 to 3 years. It is interest only. Interest rate is high, from 10 to 12%. Costs are high. Expect to pay three to 6 points.
Not everyone who gets a loan like this has credit or revenue problem. In this economy, more and more people that are licensed money lenders have sound credit and good income but somehow cannot get a bank or a conventioanl loan for one reason or the other. Banks are taking months to close a loan.
Money for funding these loans comes from private financiers; from retirement; hedge funds and Trust Deed Investors.
Essentially a hard cash or a private cash loan is a sub-prime loan. A bank puts more accent on the security instead of your revenue and credit. When you go to a pawn shop to pawn an item, the shop owner does not care what you do for living, how much you make, and what your credit score is like. He only cares for the value of that time and that too a firesale value.
In a similar fashion, a private bank, looks more at the value of your real property and how much equity you have in it. If the property is worth a million greenbacks and you owe $300,000. You can borrow $200,000 to $300,000 more on it simply. The formula banks use is known as loan to price ratio. In most cases it is possible to get a loan up to 60% loan to worth ratio.
Qualifying for this type of loan is less draconian in comparison to a traditional loan particularly when it is a non-owner occupied or a commercial property. Debt ratios are liberal and credit history has small consideration. If you had great debt proportions and great credit score why will you be trying for a tough money loan? Hence if your hard money lender is asking you for your credit report, you want to call some other person.
The Pros are it is fast. Usually you can get funds as quickly as 5 working days. Qualifying, as mentioned above, is a lot easier. Without hard money loans lot more people will lose their properties. Hard cash or private money loans satisfy an important need in the society. It is a bridge loan and could be a great relief. It's also called a band-aid loan.
The Cons are it is short term. Often not more than 7 years. Mostly it is from 1 to 3 years. It is interest only. Interest rate is high, from 10 to 12%. Costs are high. Expect to pay three to 6 points.
Not everyone who gets a loan like this has credit or revenue problem. In this economy, more and more people that are licensed money lenders have sound credit and good income but somehow cannot get a bank or a conventioanl loan for one reason or the other. Banks are taking months to close a loan.
Money for funding these loans comes from private financiers; from retirement; hedge funds and Trust Deed Investors.
About the Author:
Yanni Raz is a mentor for lots in the Estate Mortgage industry, Yanni Raz is been schooling many homeowners in California about personal loans and help some also to save their homes through credit with bad credit
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