It’s not uncommon to hear mortgage loan industry insiders refer to hard money lenders as a last resort. When this may be true to the extent that many borrowers who get loans from hard money lenders do so as a final option, there are many cases where a hard money lender may be sought before a regular banking institution. A few have a look at some scenarios where a hard money lender might certainly be a first stop rather than a final option. Licensed Moneylenders Singapore
COMMERCIAL REAL ESTATE EXPANSION
Parenthetically a real house developer has sunk $20 million into a development deal and formerly designed to sell units in January and would then commence to recoup their investments dollars from the project. As is the case numerous such undertakings, delays may push again the beginning sales particular date or the project may look at budget, leaving the developer with a cash negative situation. The designer now must take away a bridge loan in order to get through his cash poor period to be able to “survive” until the project commences to realize a cash positive position. With a traditional loan, the bank would not proceed the loan for the borrower for four to six several weeks. The developer would predetermined on his original loan or would not have cash on hand to finish in the project. The developer needs cash right now and oftentimes needs the cash for only a two to four month period. From this situation, a hard money lender would be the perfect partner because they provides a loan quickly and efficiently.
One other example of a hard money scenario is a treatment investor who needs a loan to modernize run down homes that are non-owner occupied. The majority of banks would run using this loan because they would struggle to verify that the rehabber is heading to be able to promptly sell the products for a profit — especially with no current tenants to provide lease to deal with the mortgage. The hard money lender would, in all likelihood, be the only lender inclined to consider such a task.
FLIPPING REAL ESTATE
Another group who could use hard money lenders as a starting point as opposed to a last resort are real estate investors looking to “flip properties. inch If an investor discovers a property that they deem to become great value, they might need quick and secure financing to take buy, renovate promote the property quickly. Any individual seeking to flip real house will not want to carry on to the property for long periods and the brief term loan from a hard money lender will accommodate this need. The money may also be structured as interest only, keeping the expenses low. Once the property is sold by the person who is flipping the house, the principal is paid back and the gain is kept or reinvested into the next task.
A BORROWER IN HOME FORECLOSURE
One final scenario of hard money involves a person who finds themselves in foreclosure. Once a property owner falls behind on their house payments, most lenders will not provide them with financing or restructure their current loan. From time to time, an individual who is facing foreclosure will get a hard money loan to avoid foreclosure proceedings and use the time to sell the house.
The question remains why would hard money lenders loan money if a traditional standard bank wouldn’t even consider such a gamble. The answer is two fold. The foremost is that hard money lenders charge higher rates than traditional lending institutions. The second is that hard money lenders require the borrower to have at least 25-30% equity in real estate as assets. This insures that if the borrower defaults prove loan that the lender can easily still recoup their first investment.