April 29, 2014
Hard money lenders make temporary loans, or bridge loans, with high interest rates and loan origination points. Most hard money lenders charge interest rates averaging 10.00% to 14.00%. Points can average between 3.00% and 10.00%. At Apartment Loan Store, we offer hard money bridge loans starting at 6.00%.
So why would someone want to use a hard money lender? Here are seven reasons why:
- Borrower Needs to Close Quickly – Hard money lenders can close in as little as a week, and average 14 to 30 days. Sometimes an appraisal is not needed if the lender uses the county assessor’s value or does his own market research. Great for purchasing bank-owned foreclosed properties.
- Borrower Does Not Have Good Credit – Many hard money lenders do not have a credit score requirement, and almost all will accept prior bankruptcies and foreclosures. However, if your credit report shows judgments and tax liens that have not been satisfied, they will need to be paid prior to the loan closing so that clear title can be achieved.
- Commercial Property Does Not Need to be Stabilized (Has Little or No Occupancy) – Most commercial loans are cash flow-based and require the property to have sufficient net operating income to cash flow the loan. With a hard money loan, the lender might even loan you the money to make the payments on a refinance, but on a purchase your funds will be escrowed ahead by the lender to make the payments.
- Property Needs to Be Rehabbed – Hard money lenders specialize in rehab loans. These loans are set up like construction loans and average 70% of cost or appraisal. Usually a payment reserve is built into the loan.
- Payments Are Interest Only – This is a plus in keeping the payments lower.
- No Pre-Payment Penalty – Hard money lenders usually do not have a pre-payment penalty, but some do charge an exit fee of one to two points. Most hard money loans require a minimum of 6 to 12 months of interest payments. If you pay the loan off early, you will still have to pay the interest on the remaining months of the term.
- Borrower Can Have a Lower Net Worth – Most commercial conventional loans require a net worth equal to the size of the loan. Hard money lenders do not seem to be concerned with this.
At Apartment Loan Store, we have specialized in hard money lending since 1997. To get pre-approved for a hard money loan, call one of our loan specialists at 866-811-9515 or check out all of our loan products here.