If you are looking to fund your latest real estate venture—or even your first one—you may want to look at these lenders who work outside the conventional circles of funding. Do the required research because you need to know the difference between them and the traditional lenders in order to make the right decision for yourself.
Commercial Hard Money Lenders provide funding for a wide number of ventures from hospitals and apartment buildings to hotels and office high-rise complexes. Most of the loans have collateral that is secured through real estate property with a loan-to-value amount reaching 70 percent of the property’s value. Interest rates can be up to 8 percent, while origination fees average around 1.75.
One of the better-known advantages of these lenders is that there is no prepayment penalty for an early pay off. If you have the funding available and want to pay the remaining loan balance all at once, there is no charge as in more conventional funding setups. Repayment periods can be set up to three years, but not longer than that normally.
These lenders do not ask for the bulging briefcase of documents that banks and mortgage companies require, either. Nor do they require a minimum FICO score and a set income level before proceeding with a loan application.
The fast closing once the loan is approved also makes these lenders the answer to an investor’s prayer on occasion since the well known nightmare in real estate funding searches is when a couple of days before a traditional closing something suddenly needs ‘further checking out’ and the entire process comes to a grinding halt. Not to mention the now-looming possibility of the application being denied altogether.
With all those positive aspects involved, what are the disadvantages to working with commercial Hard Money
Look at the following things that point out why these lenders are not the best ones to work with:
- Fees: these can make up a total of four percent of the total loan; banks do not charge these.
- High rates of interest: these lenders sometimes charge rates that can be up to 10 percent higher than conventional mortgage lenders.
- Down payments: these are higher here as well and particularly if the borrower’s credit score is low. This up-front payment can sometimes be the same as banks, but it also can be as high as 25 percent.
- Shorter payoff times: most of these lenders set their repayment period at three years while banks can go as far as five years.
A future borrower needs to follow the old adage of ‘do your homework’ before working with commercial Hard Money Lenders (this applies to most other things, too). Research the internet sources available and talk to a trusted friend or business professional about your project. When you have all the facts and have studied them carefully, find the lender that suits you best and can help you make your dreams into reality.
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 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 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.