A hard money loans is simply a loan one needs when you can’t get another one approved any other way, also known as a short-term bridge loan.
Most Los Angeles Hard Money Lenders will tell you that hard money loans are generally backed by the value of the property and not the actual credit worthiness of the borrower.
Since the property is the one being used as the only protection against default by the borrower, Los Angeles Hard Money Lenders say hard money loans have lower loan-to-value (LTV) ratios than conventional loans.
Understanding A Hard Money Loan
A majority of Los Angeles Hard Money Lenders will tell you that hard money loans typically carry interest rates sometimes a bit higher than conventional subprime loans.
Los Angeles Hard Money Lenders say since conventional lenders such as banks do not make hard money loans, Los Angeles Hard Money Lenders are sometimes private individuals that see the vision and value in this type of at times risky business venture/investment.
A few ways hard money loans can be used:
- Turnaround situations
- Short-term financing
- By borrowers with poor credit but substantial equity in their property.
- As a way to stave off foreclosure.
Learn How To Utilize A Hard Money Loan With A Real Estate Project
Los Angeles Hard Money Lenders say hard money loans may be needed by real estate investors who plan to renovate and sell the real estate that is used as collateral for the financing.
This option may be appealing because the property owner expects to resell the real estate within one year if not sooner and pay off the loan. The higher costs of a hard money loan are offset by some of the advantages they offer to the borrower.
Los Angeles Hard Money Lenders say that usually the approval process for a hard money loan may be much faster than applying for a conventional loan through a bank. The private investors who back the loan may make a quicker choice based on the value of the property used as collateral.
The Los Angeles Hard Money Lenders may not be as concerned about receiving repayment mainly due to the fact that there may be an even larger value and opportunity for them to resell the property themselves if the borrower defaults.
Los Angeles Hard Money Lenders might not use conventional underwriting process, which can give opportunity for adjustments to be negotiated regarding the repayment schedule for the actual hard money loan.
This could ultimately afford the borrower more opportunities to pay back the loan during the window of time available to them.
Los Angeles Hard Money Lenders might elect to not provide financing for owner-occupied residence because of regulatory oversight and compliance that may be needed to complete the financing
Overall, Los Angeles Hard Money Lenders say the costs of hard money loans to the borrower are traditionally higher compared with financing available through banks or government lending programs.
Los Angeles Hard Money Lenders say the increased cost is a tradeoff for faster access to capital, less stringent approval process and the higher risk that the lender is taking by offering up the financing.