subject: Hard Money Lenders: Circumstances Where You May Employ Hard Money Lender's Fixes [print this page] It is not rare to know mortgage industry insiders consider hard money lenders as a last measure. While this could be valid to the degree that a lot of borrowers who obtain loans from hard money lenders do it as a last resort, there are numerous situations in which a hard money lender could be wanted before a traditional banking institution. Let's take a peek at some cases where a hard money lender might be a first stop instead of a last measure.
Let's say a real estate developer has sunk ten million dollars into a development agreement and initially planned to market models in January and would then begin to reclaim their investments dollars from the project. As is the truth with a lot of such endeavors, setbacks may push back the beginning sales date or the venture could go over budget, leaving the developer with a fund negative situation. The developer now have to sign up for a bridge loan to be able to overcome his money poor period to be able to "survive" before the development begins to fully grasp a money positive standing. With a traditional financing, the bank wouldn't push through the financing for the customer for four to six weeks. The developer would fall behind on his original mortgage or will not have funds available to finish off the project. The developer requires money right now and typically requires the funds for just a 2 to 4 month time. In this situation, a hard money lender is the ideal associate because they can offer a loan quickly and without problems.
Another illustration of a hard money lender situation is a rehab investor who wants a loan to remodel run down properties that are non-owner occupied. Many banks would walk away from this loan because they would be unable to verify that the rehabber will be able to immediately sell the properties for revenue -- especially with no current tenants to provide rent to manage the mortgage. The hard money lender will, in all likelihood, be the only lender willing to accept this type of project.
Another group who could use hard money lenders as a starting point rather than a last option are real estate investors interested in "flip properties." If an investor finds a home which they consider to become a terrific value, they may require quick and safe lending to take, buy, renovate and sell the home immediately. Anyone planning to flip real estate does not wish to hold on to the property for a long time and the short-term mortgage from a hard money lender will take care of this demand. The financing may also be set up as interest only, maintaining the costs low. Once the property is acquired by the individual who is flipping the property, the principal is given back and the profit is held or reinvested to the next venture.
The last case of hard money involves somebody who finds themselves the foreclosure. When a homeowner falls late on their house payments, many financiers will not supply them with a loan or rebuild their present loan. Occasionally, someone that is going through foreclosure will have a hard money loan to avoid foreclosure proceedings and use the time to sell the house.
A hard money loan is essentially a marriage between a borrower in a difficult situation (either from a time sensitive viewpoint or because of their unhealthy financial records) and a lender who's risk adverse and is prepared to take a risk for a greater gain. While hard money lending might be a final option for many, there are plenty of situations when hard money is the only solution.
