Financial Aspects of the Hard Money Private Loans

Hard money personal loans are short-term loans that never run beyond 24 months and involve a fee to be paid, which varies between one and five percent. The interest rates vary between fifteen and twenty percent, way high than the standard bank loan programs. Hard money is speed and simplicity within the same package and hard money lenders take it up a notch, especially for real estate investors. This makes them borrow 65% to 70% of the total value of the property, based on ARV (after repair value) determined by the evaluator.

Hard money personal loans make investments possible for both commercial and residential purposes. The process is a faster one and traditional loan programs alike, provides funding for purchases; allows debt or mortgage refinancing and bridge almost every loan situation. Hard money personal loans come in a variety of plans – from interest only schemes without pre-payment penalty to extra-long easy repayment ones that sometimes stretch over to 36 months.

Hard money personal loans are available for serving multiple purposes; while commercial hard money personal loans have interest rates between 9.95% and 65% LTV; Zero Pre-Payment Penalty; 6 to 36 months’ tenure and a fast closing; residential hard money personal loans have the highest demands despite the stringent policies. This is because the residential loans can go up to 75% of the loan-to-value amount, even for non-owner occupied residences. Most of these loans are actually interest only and can even go up to a 30 year term with no pre-payment penalty. The third type is the hard money personal loans for lands that are tough to be financed, especially urban lands. Nevertheless, the LTV ranges between 50% and 55% LTV, along with facilities like fast closing and refinancing.

Let’s take a property costing $105,000, which, after repair, can be raised to a market value of $182,000 according to an appraiser. If we take a month for the repair and another two months to find a customer and sell it, the hard money lender shall shell out 65% of the ARV. The extra amount shall go to an escrow account; this shall suffice for the repair charges. The loan fee is added to the loan balance, and with a 15% interest, the whole balance can be paid within one year.

If you think that it’s asking for too much, then know that the providers of hard money personal loans deserve it. A buyer can pretty well leave a project midway and sell the property just to get the initial money back and foreclosures are sheer loss. If you are keen upon finding a hard money personal loan provider and still want to benefit, you need to be a little careful regarding the selection. There are hard moneylenders who charge atrocious rates and processing fees secured with strictest of terms – more like a protocol to wring out the maximum profit. And if that involves collateral, you better try to calm down before thinking it over. A reputed person providing hard money personal loans are thus the safest choice, even the ones with slightly higher interest rates and tenures that never go beyond 24 months.

Since the buyer pays for the appraisal of the property and the related costs, the sale of the property covers up the loan amount as well as the loan fee. The entire balance also covers up four months of interest that often shoots an annual return above 25%. That is how hard money lenders earn.

But they deserve it, since hard money loans are riskier. The buyer can pretty well leave the project midway and sell the property just to get the initial money back and foreclosures are sheer loss. If you are keen upon finding a hard money lender and still want to benefit, you need to be a little careful regarding the selection. Come hard money private lenders charge insane rates and processing fees combined with extremely strict terms. Know that this is a protocol to wring out from you the maximum amount for them to profit; there are also certain bad hard money lenders who insist upon collateral, which secures the road for them to acquire the property down the road. Thus, it’s better to go for reputed hard money loan lender, even if their interest rates are a bit higher than someone who offers medium rates against collaterals. But then again, a hard money loan term should not exceed 24 months, ideally.