Hard Money Lenders

Hard Money Lenders can resolve your urgent need of finance. If you don’t have a great credit history, and doesn’t qualify for the standard financial loans or fit to mandatory requirements of a financial institution. You can contact hard money lenders, who can offer short terms loans, usually known as bridge loans. 

The loans or finances offered by hard money lenders usually based on the value of real estate property, which will be collateralized for the loan or finance. The financing comes at higher mark up rates, compared to normal financing through standard financial institutions.

However, for those investors or individuals who doesn’t quality or fit for the necessary financing options, hard money lenders is the only option to get their loans and finances.

Mandatory Requirements

Mostly, hard money lenders offer financing facilities on certain terms and condition. They do have some required standards. Usually, they have requirement about loan to value percentage, type of real estate property that has been collateralized or mortgaged. So, the minimum and maximum amount of finance they will lend against the collateralized or mortgaged real estate property.

Why Hard Money Lenders Charge Higher Interest Rates

Normally the traditional and common credit regulations or guidelines are in place for the protection and safety of standard financial institutions from the risk of loss or default. These regulations and guidelines included prove of income, credit score, and employment duration.

On the other side, hard money lenders bypass, all these requirements or guidelines. So, they usually charge higher interest rates to their customers. This certainly protects them from financial losses in case of their customers might defaults.

History clearly suggesting that the defaults are very much common among the borrowers of short-term or bridge loans, as compared to standard loans customers from standard financial institutions, such as banks and credit unions.

Different Procedures for Hard Money Lending

Besides of the fact that hard money lending consists of higher interest rate. So, it is better for those who can’t get any loan facility due to poor credit history, recent job loss, or not qualifying for necessary documentation.

Whenever, a customer seeking for this type of borrowing, it is very common to offer the real state property being treated as collateral. Hard money lending also involved different procedures for other forms of collateral as well.

The procedure included hard money lenders to offer smaller finance amount the value ration of real estate property. So, the amount a customer can finance will be much smaller, as compared to the actual value of the real estate property.

In certain cases, customers have to collateralize another real estate property to increase the loan amount. This is called as cross collateralization in financial terms.

Charges and Law Regulations

Usually, hard money lenders charge an application fee, and prepayment penalty. These high amounts can cover the higher risks as normally bridge loans have higher default rates than normal or standard financing through financial institutions.

As hard money lenders bypass or overlook many business regulations. There are certain states like New Jersey, Tennessee, have some regulatory laws and also prohibit offering of bridge loans entirely. However, the regulatory laws can differ from state to state.

 
Summary

Hard money Lenders can resolve the financing problems of those individuals and investors who doesn’t seem to have good credit history, or can’t fit or qualifies for the standard financing options offered by standard financial institutions, such as banks, etc. hard money lenders charge you for higher mark-up rates, as compared to conventional financing. They finance against the ratio of certain percentage for the real estate property that collateralized with them for the loan amount. Usually, the loans they finance are known as Bridge loan and there are certain regulatory laws for these types of loans, which differs from state to state.