It’s not uncommon to know mortgage industry insiders refer to hard money lenders as being a final option. While this can be true to the extent that lots of borrowers who solicit loans from hard money lenders do so as being a last option, there are many cases in which a hard money lender might be sought before a regular banking institution. Let’s take a look at some scenarios where can be quite a first stop rather than a last resort.

Commercial Property Development – Let’s say an actual estate developer has sunk $10 million in to a development deal and originally planned to sell units in January and would then start to recoup their investments dollars through the project. As is the case with many such endeavors, delays may push back your first step sales date or perhaps the project could go over budget, leaving the developer having a cash negative situation. The developer now have to take out a bridge loan in order to get through his cash poor period in order to “survive” till the project actually starts to realize a cash positive position. Using a traditional loan, the bank would not proceed the loan for the borrower for 4 to 6 weeks. The developer would default on his original loan or will not have funds on hand to finish the project. The developer needs cash at this time and oftentimes needs the money for just a 2 to 4 month period. Within this scenario, a hard money lender will be the perfect partner simply because they provides a loan efficiently and quickly.

Rehab Investor – Another demonstration of a hard money scenario is really a rehab investor who demands a loan to renovate run down homes which are non-owner occupied. Most banks would run from this loan since they would struggle to verify that this rehabber will be in a position to promptly sell the units for a profit — especially with no current tenants to offer rent to handle the mortgage. The difficult money lender would, in all likelihood, function as the only lender willing to consider this kind of project.

Flipping Properties – Another group who may use hard money lenders as a starting place rather than a final option are real estate property investors trying to “flip properties.” If the investor locates a home they deem to become a great value, they might need fast and secure financing to adopt buy, renovate and sell the home quickly. Anyone looking to flip real estate property does not want to hold to the property for long periods as well as the temporary loan from will accommodate this need. The pdkfqq can be structured as interest only, keeping the costs low. When the property is sold by the individual who is flipping the house, the main is paid back as well as the profit is kept or reinvested into the next project.

A Borrower In Foreclosure –

The last scenario of hard money involves someone who finds themselves in foreclosure. After a homeowner falls behind on the house payments, most lenders will never provide them with financing or restructure their current loan. Occasionally, an individual who is facing foreclosure will obtain a hard money loan to avoid foreclosure proceedings and make use of enough time to sell the home.

The question remains why would hard money lenders loan money in case a traditional bank wouldn’t even consider this type of g.amble. The reply is two fold. First is very difficult money lenders charge higher rates than traditional finance companies. The next is the fact hard money lenders require borrower to possess at the very least 25-30% equity in actual estate as collateral. This insures that if the borrower defaults on their loan that the lender can continue to recoup their initial investment.

A hard money loan is essentially a marriage between a borrower in a tough spot (either from a time sensitive perspective or because of their poor financials) and that is risk adverse and is ready to take a risk for a higher return. While hard money loans may be a last resort for many, there are numerous scenarios when hard funds are the best way to go.

Accredit Money Lender – Read This Article..

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