JustLkg, Other/Just Looking in Middletown, NY

2 References were made about hard money lenders. What do you mean? Thanks.

Asked by JustLkg, Middletown, NY Sat Jul 17, 2010

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Keane Ng, Mortgage Broker Or Lender, Renton, WA
Sat Jul 17, 2010
One more thing. Hard money lenders typically want at least 40% down. Often more in this marketplace.
1 vote
Keane Ng, Mortgage Broker Or Lender, Renton, WA
Sat Jul 17, 2010
Hard money lenders are lenders who provide financing without any credit or income qualifications required from the buyer (Typically). It's an equity driven loan product where the lender knows that if the buyer defaults, they can foreclose and get all their money back. They are typically between 9-15% in interest rate and they usually cost 3-5% in loan fees. Very expensive loans. They are ideal for short term financing and fast closings.

For instance, let's suppose you found a $500k property on sale for $250k. You don't have $250k but you have $125k. You find a hard money lender to provide $125k in financing and you pay $125k down. These lenders will often be able to close as fast as a cash transaction and you can buy the property in a timely fashion. If you're paying 12% and you paid $4-5k in fees for that loan, it's probably worth it to get the $250k equity in the property. You can then decide if you want to refinance or flip the property.

That is just one scenario in which hard money is used. For the purpose you illustrated earlier, it may be costly to pay that loan for 3 years while you wait for your foreclosure seasoning. It may be worth it if the house is cheap enough and you put enough down, but it all depends on the financing available and how good of a deal the property is.
1 vote
Arlene Diefe…, , Goshen, NY
Sat Jul 17, 2010
You can't go to a bank. You have to find someone who has money and will lend it to you. It will be at a high rate of interest.
1 vote
Don Tepper, Agent, Burke, VA
Sat Jul 17, 2010
A hard money lender lends based (largely) on the assets--the equity in the property--and not on the basis of your credit. That's changed in the past few years; hard money lenders now do consider credit, but they still put most of the emphasis on the equity in the property.

Hard money is very, very expensive. Typically around 5 points and 15% interest. It's also intended for short-term lending--often 6 months, and not more than a year. Hard money is often the lender of last resort if you want to acquire a property with a lot of equity but don't have the financing to do it.

Hope that helps.
1 vote
Bill Smith, Agent, Monroe, LA
Wed Jul 28, 2010
Typically Hard money lenders are looking for a 70/30 loan to value ration, charge 0-5 points, and charge 10-20% interest. Its usually used for rehabbing houses like they show on flip that house.
Bill SMith
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