You may have heard the term Hard Money used when talking about real estate loans. So what is it? Hard Money, also known as Private Money, is a term used to describe loans that are made by private individuals or entities. They are used frequently in California real estate transactions.
Private money differs from conventional loans in that private money, or hard money, is based solely on the property's collateral. That is why it is commonly found that these loans are written way beneath the actual value of the property concerned. Basically, the investor wants to ascertain that the available equity would be enough to cover any loss or default by the borrower.
Often times hard money loans are from private investors. However, they can also be from private institutions and entities.
It is always worthwhile to determine whether private money is the right option for your needs. Determining this requires you to consider a number of different variables. First of all, before you decide to make use of private money, you should always consider conventional sources of money. Conventional sources would include national and regional banks and credit unions. When it comes to the best competitive pricing and terms for the borrower, these sources are the best solution.
However, you may find that a normal bank does not wish to finance your transaction in which case you can then look into whether or not you qualify for a private money loan. To be able to take advantage of this option you will need equity in the transaction as well as the ability to repay the loan at two or three times the amount you borrowed in interest and other fees.
At this point you may be wondering why anyone would want utilize hard money. The reality is that there is a time and place where this type of loan makes sense. Some of the reasons could include:
You need a Bridge Loan.
You're an investor who needs cash to buy property.
You need to rehabilitate an existing property for the purpose of selling.
You are in a short escrow and need to purchase quickly.
For financial reasons you find that you need to access the equity in your property.
You need to extend a bridge loan.
You are unable to get finance from banks because you have lots of properties.
The bank will not loan you more because you have a unique property.
You are in a strong equity position and you are able to repay the loan but due to a negative credit record the banks have turned you down.
You require a temporary cash flow for your business.
When it comes to private money, as with most things in life, there are both advantages and disadvantages. Private money is usually expensive and in most cases it has shorter terms than the majority of bank loans. But, because of the speed and flexibility of these loans they are very convenient and valuable. For many borrowers with California real estate needs it can be a very practical tool that they can make use of.
Really, hard money is really not that hard. In fact the time in which it takes to complete a private money transaction is typically much faster than a traditional bank loan. The difficult part about hard money loans is the fee and terms associated. It definitely is not the best solution for everyone, but it can be a perfect solution for some.
Private money differs from conventional loans in that private money, or hard money, is based solely on the property's collateral. That is why it is commonly found that these loans are written way beneath the actual value of the property concerned. Basically, the investor wants to ascertain that the available equity would be enough to cover any loss or default by the borrower.
Often times hard money loans are from private investors. However, they can also be from private institutions and entities.
It is always worthwhile to determine whether private money is the right option for your needs. Determining this requires you to consider a number of different variables. First of all, before you decide to make use of private money, you should always consider conventional sources of money. Conventional sources would include national and regional banks and credit unions. When it comes to the best competitive pricing and terms for the borrower, these sources are the best solution.
However, you may find that a normal bank does not wish to finance your transaction in which case you can then look into whether or not you qualify for a private money loan. To be able to take advantage of this option you will need equity in the transaction as well as the ability to repay the loan at two or three times the amount you borrowed in interest and other fees.
At this point you may be wondering why anyone would want utilize hard money. The reality is that there is a time and place where this type of loan makes sense. Some of the reasons could include:
You need a Bridge Loan.
You're an investor who needs cash to buy property.
You need to rehabilitate an existing property for the purpose of selling.
You are in a short escrow and need to purchase quickly.
For financial reasons you find that you need to access the equity in your property.
You need to extend a bridge loan.
You are unable to get finance from banks because you have lots of properties.
The bank will not loan you more because you have a unique property.
You are in a strong equity position and you are able to repay the loan but due to a negative credit record the banks have turned you down.
You require a temporary cash flow for your business.
When it comes to private money, as with most things in life, there are both advantages and disadvantages. Private money is usually expensive and in most cases it has shorter terms than the majority of bank loans. But, because of the speed and flexibility of these loans they are very convenient and valuable. For many borrowers with California real estate needs it can be a very practical tool that they can make use of.
Really, hard money is really not that hard. In fact the time in which it takes to complete a private money transaction is typically much faster than a traditional bank loan. The difficult part about hard money loans is the fee and terms associated. It definitely is not the best solution for everyone, but it can be a perfect solution for some.
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Understanding all there is to know about San Diego Hard Money Resources is not always easy. Luckily you can get everything you need right here at Scottway Capital San Diego Hard Money and San Diego Hard Money Resources.
