When borrowers think of private lenders, they often don’t understand the benefits of this lending option. But hard money loans can offer many benefits to the right borrower.
Hard money loans are a very different creature than the traditional bank loans that most people are familiar with. Unlike their stogy counterpart, the terms and conditions to qualify for a hard money loan are quite relaxed in many cases. The biggest factor in landing these types of loans is the value of the real property being used as collateral. Lenders use the loan to value ratio to determine the loan amount they are willing to offer. In most cases the highest a lender is willing to go on LTV is 50% to possibly 75% of the value of the collateral. This insures the lender that the collateral will always hold more value than the outstanding balance on the loan should the borrower default.
Knowing that your loan will only be around two thirds the value of your collateral might seem odd but there are many other factors which work in the borrowers favor to offset that one possible downside. Hard money loans are a viable solution for anyone who needs a loan but does not have the stellar credit that banks or mortgage lenders are going to require. Sure the interest rate is going to be higher than a bank would charge but higher interest is the price you pay to secure a loan with bad credit. It is also a good first step to take to rebuild your credit.
When Time Is Money
Hard money loans are also a very appealing option when time is critical for a business deal. Time really can be money in the business world. And if you have the chance to get in on a great deal but need to do it quickly, then a traditional bank might not be able to fund quickly enough to meet your needs. The solution is a non-traditional loan to land the deal and then the possibility of financing a traditional loan to pay off the first loan, leaving you with a lower interest rate for the long term.
The Package Deal
Traditional loans are typically a one size fits all deal and it is the borrower’s responsibility to find a way to make it work. But a non-traditional, or asset based loan is something that can be tailored to meet the individual needs of each borrower. Private lenders have much more flexibility because they are not forced to follow the state or federal laws which apply to banks and other commercial lenders. For this reason, borrowers are willing to pay a higher rate to enjoy the comfort of a customized loan that offers terms to meet their needs. In addition, there is far less paperwork and red tape to deal with when applying for a private loan. So your stress level and time invested in the process are both much lower. Just as when selecting your home, you pay more for custom features when getting a custom loan but the price can be worth it to enjoy the added benefits.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701 
No comments:
Post a Comment