Hard money is non-public money lending, the money you may receive from people that may loan you their cash against your property. Hard funds provider is the bank and the bank will Loan you their cash and put a lien against your real estate, the same with hard money lenders.
What is the difference between the hard money lender’s programs and the bank across the street?
1. Hard cash lenders can help stockholders with big loan amounts, while banks will make it very troublesome on the borrower to lend these sizeable amounts so that the loan would probably finish up with an insurance firm to lend the money and the requirements are high.
2. Hard money lenders can fund any hard loan inside a week, while for the banks it will take at least a month or more.
3. Hard money lenders will ask for little documentation, while the banks would ask for almost everything you have, taxes, revenue, assets, history of the property before and plans for after the purchase, business license, basically they may definitely want to see more from you to loan you some money.
4. Hard money lenders have guidelines but they can make exceptions without processing it through a whole underwriting team- while the bank needs to go through different departments and underwriters and processors solely to make an exception, and then the exception won’t get excepted.
As you see to get a tough cash loan is way easier than to qualify for a loan from a bank because of the full process, the banks are big corporations and huge corporations have many different rules inside their firms, and to get an exception for these rules is pretty much impossible, and that’s why many financiers would rather go with a tough lender.
So now you are most likely thinking what is the catch with the hard money lenders? OK, so let’s chat about all the reasons why you should not consider making an application for a hard cash loan:
1. Hard money banks for their services will charge you 4 to 9 points on the loan- while the banks will charge you only 1 to 2 points. Example: If you happen to have a loan amount of $1,000,000 and your hard money lender will charge you 5 points upfront then you will pay $50,000- while the bank will charge you 2 % which is $20,000, that is a bit different but under different circumstances, for some people, it’s still a great deal.
2. License lender thanks to the fact that they will loan you money without showing your credit report and your earnings they will set the loans rate of interest 9 percent-15 percent- while the banks will set your loans interest rate to 7 percent- 10 p.c, again that’s a huge difference if you’re thinking about it except for these folk that want the hard cash loans it’s still a great deal.
You have got to understand that most investors or house buyers can not qualified today with banks for any sort of Loan, hard money banks can get you the deals you would like (repossessions, Leo’s) without even considering showing all the pointless documentation, all you must have is some money in your pocket if you’re buying, and if you are refinancing then you need enough equity since the hard money lenders will generally go up to 65 p.c at the most.
Also to find good banks it is not so hard, it’s actually extremely easy because there are several personal hard cash banks that are on the lookout for real estate properties and notes to buy so that they can make their points upfront and obviously the high IR, if you will give it some thought, it’s far better then put the money in the bank.
Example: If a tough lender put $1,000,000 in the bank and the bank will pay him 5 p.c a year- while if he will be able to loan the money to an investor that wish to get a property or to refinance a property, he will charge his 5 points and he’ll get 15 % rate of interest on his money, that’s a major difference. Good luck to you all backers out there.