What is a Hard Money Loan?
A hard money loan is often used to purchase real estate. The loan is available from a lender known as a hard money lender. You must secure the loan with real estate that you own or are purchasing. In most cases, a traditional loan is what most people would choose to purchase real estate. But there are situations in which a hard money loan is worth considering.
When to Consider a Bronx Hard Money Loan
A hard money loan is an alternative to a traditional loan. Perhaps you need to act quickly on a time-sensitive deal. It usually takes less than a week to get approved for a hard money loan in Bronx. If time is an issue, then a Bronx hard money lender is possibly the better option.
You can also consider this loan when a traditional lender refuses your application. Maybe it’s because you’ve got bad credit or a sketchy work history. A Bronx hard money lender is less concerned with these issues. The value of the collateral property carries the most influence.
How you plan to use the property is of importance as well. You’ll need to present the lender with your plan to repay the loan. You could renovate and resell the property. You’d then use part of the profits to repay the loan. If you’re able, you could also obtain traditional financing to repay the loan.
Another consideration is the down payment. With a traditional loan, a lender might require you to have a 20% to 25% down payment. But with a hard money lender, it might be possible to get a loan by putting zero down.
Types of Properties Hard Money Lenders Can Help With
You can use a hard money loan for several types of property. Commercial property, vacant land, residential homes, and industrial buildings are only a few examples. But it’s important to know if the lender you’re speaking to only deals with a specific type of property. In most cases, the lender will have a specialty. For instance, the lender might provide loans exclusively for commercial property.
Most hard money lenders refuse to accept owner-occupied homes as collateral. Owner-occupied homes require that the lender follow a certain set of regulations and rules. The process is more complicated and usually unattractive to many Bronx hard money. If you’re using owner-occupied property as collateral it’ll be significantly harder to get a hard money loan. The Dodd-Frank act makes it difficult for hard money lenders to lend on owner-occupied properties.
The interest depends on the lender. Just like with a traditional loan, you’ll find that not all lenders offer the same rates. Your location plays a role as well. A location with several hard money lenders will usually have lower rates. This is because lenders are in competition for your business. But a location that has little competition will usually result in higher interest rates.
No matter your location, interest will be on the high side. You can generally expect to pay between 10% to 15% interest, sometimes more. Hard money interest rates are higher because the lender is accepting more risk than a bank or credit union.
Locating a Lender
Finding a hard money lender takes some work. It’s not as easy as walking into a well-known bank or credit union. The best place to start is with friends and family. They could possibly have recommendations.
Searching online is also a good way to locate lenders in your area. Evaluate each lender, and then decide which ones to contact. Check for reviews and other information about the lender.
Your local real estate investor club is another option. Hard money lenders are known to attend club meetings for networking purposes. You can use the opportunity to speak with several lenders. If there aren’t any lenders, then you can still network with the attendees. Other real estate professionals, such as mortgage brokers and real estate agents, can provide useful information.
Risk of Foreclosure
A hard money lender has the same rights as a bank or mortgage lender. In other words, the lender can foreclose on your property. The lender will likely have a first mortgage. That means in the event of a foreclosure, the lender will have a priority claim over the proceeds. But if the proceeds aren’t enough to cover the lender’s investment, then the lender can possibly sue for the remainder. The laws of the state determine if the lender has a right to sue.
The conditions for foreclosure are set by the lender. These conditions may or may not be anything like you’d have with a bank. For instance, you might have to maintain a specific property value. If the value falls, then it could result in foreclosure. The lender could even set a requirement about how to maintain the grounds.
There’s much more to know about obtaining a hard money loan. Do your research to see if this loan is right for you.