Hard money lenders provide financial resource for owners who are looking for non-traditional loans. Qualifying for hard money loan are much relaxed than getting it from bank, as hard money lenders lenient on personal credits. Banks charge interest rates and fees that could make borrowers tremble and base lending decisions on whether it will be enough equity in their subject homes that foreclose and still could turn a profit. The good thing is you may qualify for hard money loan with bad credit or a pending income that is difficult to prove.
Sacramento Hard Money Loans are used by many investors as a short term solution to fund real estate property. It can be used to fund fix and flips until long-term financing can be put down in place. It is usually expensive than traditional financing and banks. Hard money is a great option for many investors. The first thing you notice with hard money lenders is that; they charge higher than conventional lenders. Most of them are charging about 14 to 16 percent points for their money. Points are the percentage of total loan and could add costs quickly when they are charging 2 to 4 percent on loan.
|California Hard Money Lenders|
Why investors would use hard money
The first reason is they may loan the entire amount of money you will need to complete a deal. Hard money lenders base the amount of the loan on the after repaired value of AVR. They will loan 65 to 70 percent of you AVR, which is not the purchase price, this is how the property will be worth of, once you fix it up.
How is the deal structured?
Let’s take an example. You buy a home of worth $60,000 having AVR $130,000 and lender goes up to 70 percent on the property. The lenders need bids and estimates for repairs and they will pay out the money for repairs like construction loan. They pay 25 percent for repairs needed at closing and the other payment comes under 25 percent increments as the repairs are completed. They won’t charge interest or the points. Some hard money lenders charge 15 percent interest and 4 points, but will reduce the points paid after you have done few deals with them.
Cost will add up very quickly to this deal very quickly. The interest will cost you around $6,825 and the points $3,640 if you use hard money for over 6 months.
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