Customers who can find an California Hard Money lender shouldn’t expect to be offered grade-A terms, though. Private money mortgages typically have rates well into the double-digits and often come with several upfront points. People who don’t own at least 30 percent or 40 percent of their homes probably won’t even be able to get a loan. That’s because hard money lenders limit borrowers’ loan-to-value ratios so they can still make money off their properties if they have to foreclose. If a property in a subdivision is worth $100,000, the loan-to-value on a hard money loan may be 50 percent to 65 percent, so maybe $65,000 maximum on a first mortgage is loaned against the property to pay off the old lender who’s preparing to foreclose. That does not mean that that customer can’t take the property and sell it tomorrow for $100,000 and reap the benefits of that additional $35,000. A person is better off paying 14 percent, or a higher rate than the normal rate of 9 or 10, to keep the property rather than lose it. Or say you don’t get $100,000 for it, you get 90. However, ninety is better than zero. Consumers need to watch out for “loan-to-own” predators, too. They structure hard money loans in such ways that borrowers inevitably fail just so they can take possession of their homes and profit off their sale. It’s the same rules you get on any loan. Before you agree, clearly understand what it is you’re getting into. Understand what the fees are and what the actual cost of the money is to you. You have to be smart. Despite the pitfalls, lenders say that an California Hard Money loan can provide borrowers a lifeline in times of need. Consumers just need to make sure their loans will help get them out of debt, not bury them even further.
Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027111 Congress Ave |Austin | Texas | 78701
About the author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true.
Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.