Financing is a fascinating industry. Plus, when you’re looking to get involved in real estate, it’s essential to get loans to get you started. Through financing, investors can leverage their capital into purchasing more properties. This contributes to further growth and the potential growth of the investor’s limited equity funds.
So, why hard money loans? And what exactly are they?
What’s a hard money loan?
A hard money loan is a type of loan typically issued by a private investor or companies (almost never by a commercial bank or other deposit institution). Hard money loans are financed based on assets, through which a borrower receives funds secured by real property.
Typically, these loans are issued at higher interest rates than conventional residential property loans. Similar to a bridge loan, hard money has specific criteria for lending and cost to the borrower.
What’s the difference between a hard money loan and a bridge loan?
A bridge loan generally refers to an investment property or commercial property in transition. The property does not yet qualify for traditional financing. So, hard money can signify a distressed financial situation such as arrears on the existing mortgage or bankruptcy and foreclosure proceedings are occurring.
How are the loans collateralized?
Hard money lenders all have different criteria when considering borrowers. The loans are typically collateralized against the quick-sale value of the property. Most hard money lenders fund in the first-lien position. Lenders typically structure loans based on a percentage of the purchase price, or loan to cost (LTC) as well as the loan to value (LTV). The value is based on the quick-sale value of the collateral property.
How does Center Street Lending value their loans?
See CenterStreetLending for a detailed outline of our loan programs. Here are some more commonly asked questions.
What is your maximum loan to value?
Loans must not exceed 65% of the estimated as repaired value of the property
Do you offer 100% financing for properties?
No. Borrowers must provide at least a 20% cash down payment.
Do you offer financing for the property improvements?
Once the improvements have been made and inspected by us, Center Street Lending offers financing on property improvements for select borrowers.
There are dozens of questions you should be asking about hard money loans. These are just a few to get you started. For more frequently asked questions about hard money loans, head over to Center Street Lending’s website to learn more.