If you own real estate if it is single family home, apartment, loft building or a commercial property, in this economy, chances are you already know about Hard Cash Loan.
Fundamentally a tough money or a personal money loan is a sub-prime loan. A bank puts more focus on the safety rather than your revenue and credit. When you go to a pawn shop to pawn an item, the shop owner does not mind what you do for living, how much you make, and what your credit score is like. He only cares for the value of that time and that too a firesale value.
Similarly, a private lender, looks more at the value of your real property and how much equity you have in it. If the property is worth 1,000,000 greenbacks and you owe $300,000. You can borrow $200,000 to $300,000 more on it easily. The formula lenders use is called loan to worth proportion. In most cases it is easy to get a loan up to 60% loan to value ratio.
Qualifying for this kind of loan is less harsh as compared to a traditional loan particularly when it's a non-owner occupied or a commercial property. Debt ratios are liberal and credit score has little consideration. If you had great debt ratios and sound credit score why will you be applying for a tough money loan? Therefore if your hard bank is asking you for your credit report, you want to call someone else.
The Pros are it is fast. Usually you can get funds as quickly as 5 working days. Qualifying, as mentioned above, is far easier. Without hard money loans lot more folk will lose their properties. Hard cash or private money loans meet an important need in the society. It's a bridge loan and can be a great relief. It is also called a band-aid loan.
The Cons are it is short term. Generally only seven years. Usually it is from one to three years. It is interest only. Rate is high, from 10 to 12%. Costs are high. Expect to pay 3 to 6 points.
Not everyone who gets a loan like this has credit or revenue problem. In this economy, more individuals who are money lender have good credit and good income but somehow can't get a bank or a conventioanl loan for one reason or the other. Banks are taking months to close a loan.
Money for funding these loans comes from non-public backers; from retirement; hedge funds and Trust Deed Backers.
Yanni Raz is a trainer for lots in the Property Mortgage industry, Yanni Raz is been schooling many homeowners in California about cash loan and help some also to save their houses through loans with bad credit