HARD MONEY LOAN

Hard Money Loan:

Hard money loan is a specific type of asset-based loan financing in which a borrower receives funds secured by the value of the real estate Commission. Hard money loans are typically issued at much higher interest rates than conventional commercial and residential real estate loans and almost never have been issued by a commercial bank or other institution for deposit. Hard money is similar to a bridging loan, which usually has similar criteria for loans and expenses of the borrowers. The main difference is that bridging loan often refers to the commercial property or investment property, which may be in transition and still be eligible for the traditional solid money, while the asset-based lending not only with a high rate of interest, but probably a difficult financial situation, including existing arrears of the mortgage, concernor where there have been proceedings for bankruptcy and foreclosure.

Many hard money mortgages are held by private investors, usually in their local areas. Usually the borrower's credit score is not important, since the loan is secured by a solid asset value of the property.Usually the larger loan, you can expect will be between 65% and 70% of the value of the property. That is, if the property is worth $ 100,000, the lender will advance $ 65-70, 000, 000 against it. This low LTV (loan to value) provides additional security for the lender in the event that the borrower does not pay and they must be limited to the property.

Loan structure:

Hard money loan is a loan collateralized against the quick sale value of the property for which the loan is made of real estate. Most lenders Fund in the first lien position, meaning that in case of failure, are the first creditor to receive remuneration. Sometimes, the lender will subordinate to another first lien position loan;This loan is known as second lien loans, mezzanine or Junior lien.

Hard money lenders structure loans based on a percentage of the value of quick sale of the property of the item. This is called the loan to value ratio or Territorial and normally between 60% and 70% of the market value of the property. In order to determine this visa, the word "value" is defined as "actual sale price." this is the amount that the lender can be expected to be realized from the sale of the property in the event that the loan defaults and the property was sold to one of four months. This value is different from the evaluation of market value, which involves a transaction with the length of the weapon in which neither buyer nor seller acting under coercion.

Below is an example of buying commercial real estate may be classified as hard money lender:

• 65% hard money (Conforming loan)
• 20% borrower equity (cash or additional obligations of real estate)
• 15% Seller carryback loan or other loan subordinated (mezzanine)

History:

Hard money is a term that is used almost exclusively in the United States and Canada where these types of loans are the most common. In commercial real estate firm money developed as an alternative to "limit" for owners seeking capital against the value of your funds. The industry began at the end where the credit industry suffers drastic changes in the United States (see FDIC: evaluating the consumer revolution).

Industry has suffered serious setbacks during the money solid real estate crash of the 1970 's and early 1990 's due to lenders overestimating and funding properties at well above market value. After this period, reduce the rates of this visa have been the norm for hard money lenders trying to protect against fluctuations in the market. Today, high rates of interest are the marks of hard money loans, as a form of compensation of creditors for a significant risk to commit.

Cross collateralizing hard money loan:

In some cases the loan-to-value loans, not enough to pay the minimum makes existing mortgage lender to lender of money hard to be in the top of the arrest. Since the interest in the property is the basis of a hard money loan, the lender usually always takes first position on the retention of the property. As an alternative to a shortage of equity below minimum lender loan to value potential money lender programs guidelines too hard will allow the "cross" of the other properties of the borrowers. Cross-collateralization of more than one property of hard money lending operation, also called "common mortgage".