5 Biggest Myths About Hard Money Loans
This should hopefully dispel any last vestige of concern or uncertainty about the value and use of hard money in real estate. Be it to buy your own home or a 2nd home, a flip, an investment property, land to build on, etc. – hard money can be the best choice for you.
The myths so aptly covered in Trust Deed Capital BLOG, by Ken Meyer on July 21, get cleared up by providing the facts:
Myth #5: Only the Desperate Seek Out Hard Money Loans
One of the most difficult myths to dispel is that anyone who goes outside the traditional lending structure (banks, for the most part) must be desperate for a loan. This is the furthest thing from the truth, since most of the people who seek out hard money loans are smart business people who would rather work with an individual investor on a project than deal with a huge lending institution.
Myth #4: Hard Money Lenders Are All Loan Sharks
Hard money lenders are business people, just like their clients. A hard money lender provides money based on the investment, rather than based on the person’s credit score, which means that the lender’s eye is on making the investment succeed. Fairness and good business sense means you get return business. Setting impossible, harsh terms on the other hand means that people won’t come to you unless they’re desperate, which is something hard money lenders want to avoid at all costs.
Myth #3: Hard Money Loans Are More Expensive Than Traditional Ones
You get what you pay for when it comes to financing. If you need to get money in the next two days so you can acquire and flip a property for a huge profit, then time is of the essence. If a traditional lender can’t get you the money in the time frame you need, then it simply isn’t a valid option.
Hard money loans provide flexibility, but their costs are also affected by the loan in question, the profit to be made, and the laws of supply and demand. All of that said, the interest rate on a hard money loan can sometimes be higher than a traditional loan, but they are also usually shorter term and can close quickly. Time is money in investment real estate, so when you look at the big picture, a hard money loan is usually more cost effective than a traditional loan.
Myth #2: Hard Money Loans Have Draconian Rules
Hard money loans are given by an individual, which means that the rules will change from one lender to another. Generally speaking, hard money loans have different restrictions put on them than consumer loans. This is for a specific reason; the lender is looking out for the investment. Lenders and borrowers are encouraged to negotiate until they reach terms they feel they can work under, which is often not the case for banks and other traditional lenders.
Myth #1: It’s One or the Other
Perhaps the biggest myth when it comes to hard money loans is that you can’t also have soft money loans (the more typical sort you get from the bank). There are no rules that say this, and often those who need as much financing as they can get will draw from multiple sources to make sure they have enough capital to get the project done.
Original Trust Deed Capital Blog link: http://www.trustdeedcapital.com/blog/5-biggest-myths-about-hard-money-loans?success=true
This same blog comments on how scary hard money can seem to be, but this only comes about because of the lack of understanding and knowledge required to properly invest with or borrower hard money.
I hope that if you or someone you know that is having trouble getting a loan elsewhere, has a time sensitive purchase requiring financing, etc. that you honestly check out hard money as an option. You may well be very glad that you did!
Best, Forest – The Guy in the White Hat
Hard Money Broker Serving all of CA Since 1988!
Sun Pacific Mortgage & Real Estate, Family owned & operated (707)523-2099.
www.Sunpacmortgage.com; CA Bur of Real Estate license #01009559 and NMLS #299456
Hard Money, also known as Private Money, is money borrowed from private individuals. Most private money lenders/investors lend money through a mortgage company (there are laws that require this).
Hard Money is for buyers who still want to buy even with tarnished credit backgrounds. It’s useful for those who still need to refinance their homes to buy another property, do home improvements, etc. Hard Money is the only option out there if they have been turned down by their favorite bank or savings and loan or mortgage broker or mortgage banker. Or all of the above!
Some of the benefits of a Hard Money loan are:
- Basically considered “all cash”.
- Deemed extra strong in purchase contracts.
- Can be used to purchase or refinance dump property.
- Helpful to a bad credit borrower, irregular income borrower or large cash-out borrower
- Benefits someone needing fast cash or short term Bridge loan, etc.
Hard Money loan qualifications are more forgiving than conventional or bank financing.
These loans are based largely on equity. The most you will get is 75% of the value of the property.
The two basic qualifications are:
- Decent existing real estate equity or at least a 25% down payment if a purchase.
- An ability to repay the loan.
The loan rates are higher and it will likely cost a bit more than a 30 year fixed rate loan but it can get you the money you need if refinancing or it can fund your next dream home purchase. Many people have credit card rates that are 15% to 32% and Hard Money rates average 9% to12% with interest only payments.
If you are in California, I invite you to give us a call at 707-523-2099 to see how Hard Money will work for your situation. Having worked with many types of loan scenarios at Sun Pacific Mortgage & Real Estate since 1988, we are very experienced, we are honest and our rates are pretty good!
I have dealt with many types of loan scenarios throughout California since 1988. We are honest from the start as to how we can help you and we have pretty good Hard Money loan rates.
I hope you found this blog helpful and now have a better understanding of what is a hard money loan.
Experienced and licensed Brokers, Realtors & Lenders are important for all your lending and/or real estate transactions.
I recently read an article about the importance of using an experienced and licensed Lender as well as Real Estate Agent and how not using one of each actually added time, money and ended in some loss of the Buyers.
Here is the original link to the below fun and informative infographic with really good reasons why one not only wants to use a licensed Real Estate Professional but also applies to licensed and experienced Brokers and Lenders:
5 REASONS TO LOVE USING A REAL ESTATE PROFESSIONAL [INFOGRAPHIC] – The KCM
It truly does benefit the Buyer and Borrower alike to find a local expert who can help them through the real estate or lending transaction. So don’t make the mistake and try to do it yourself, unless of course you are a licensed and experienced Broker, Real Estate Agent or Lender.
Best, Forest – The Guy in the White Hat
Sun Pacific Mortgage & Real Estate
Forest Tardibuono is Co-Owner and CA BRE Broker known as “The Guy in the White Hat” of family owned & operated Sun Pacific Mortgage & Real Estate – Your California Alternative Finance Lender since 1988.
P.S. We love referrals! www.sunpacmortgage.com. BRE license #01464899/NMLS #360993
What a great time to be a Hard Money Investor, property values are just continuing to go up. Since 2012 private money loan borrowers has only been increasing as it’s the only game in town after B of A and Wells Fargo tell the Borrower “no”. Borrowers who have poor credit or difficult-to-prove income due to being self employed but have a decent down payment or existing equity know that they can most likely get a loan from us, despite being turned down elsewhere.
Anyone with money can invest and become a Private Mortgage Investor. It’s easier than you would think.
As the Broker of Sun Pacific Mortgage & Real Estate, I have dealt with Private Investors for over 25 years and we have become known for our integrity and honesty. Numerous friendships have been formed not only with Investors but with our Borrowers, due to the smoothness and honesty of service to both.
Becoming a Private Investor can earn you upwards of 13% in return by investing in mortgages. And by investing in real estate mortgages your investment is secured. Investing in mortgages isn’t only buying or selling of mortgages at a discount. It includes directly lending your hard money to individuals and securing that loan with a mortgage against their real estate.
I promote purchase loans as well as refinance loans and these can be at any LTV up to 75%. Right now the predominant offerings are purchase loans with 30% down. These loans should be made as the security is at its lowest valuation in years and the Buyer is putting 30% down. With that down payment, there is plenty of protective equity. Further, with that down payment the homeowner is not likely to walk away from the property.
As a Private Investor you can set the yield on the promissory note with the interest rate, points and prepayment penalties. Many individuals have started or are continuing as a Private Mortgager Investor as they can secure a consistent monthly income from it. It can be an excellent cash flow for someone retired or looking to set up their retirement funds.
For example, a private investment recently done for an individual to buy a home came to $196,000 with a rate of 12% and the Investor gets a monthly return of $1,960. Homeowner is very happy and intends to refinance down the line for lower rate but gets the home they’ve been searching for!
A Private Mortgage Investor is also known as:
1. Private Mortgage Lender
2. Hard Money Investor
3. Hard Money Lender
These are all private individuals lending their money directly to the borrower with a promissory note with interest rates, points and prepayment penalties the investor sets, and securing that promissory note with a real estate mortgage.
Private Mortgage Investing is ripe. Time to jump on the bandwagon with Sun Pacific Mortgage & Real Estate and get a good taste!
If you are interested in investing with us then Call Our Office at (707) 523-2099 and ask to speak to me, FOREST – The Guy in the White Hat!
CA BRE Broker – California Bureau of Real Estate Broker. Corporate License # 01464899.
NMLS – Nationwide Mortgage Licensing (Registry) System. Office NMLS # 360993