Investment Property Loans

Can’t Pay Back Hard Money Loan

House Flipping Tips

Hard money lending is often a great answer for real estate investors that need cash in a hurry and with a variety of terms and payment schedules. While many lenders understand borrower’s specific situations, they also need to protect investment, which means acting correctly when a borrower defaults on an outstanding loan. When you take out a hard money loan, you need to understand the terms and conditions of the loan fully.

Default Reasons

Missed Payment – Due to the short-term nature of a hard money loan, a simple missed payment could be all that’s required for the lender to call the loan as due.
Missed Balloon Payment – Nearly all hard money loans come with a balloon payment that is much larger than the individual monthly payments and is due at the end of the agreement. Generally, the borrower is able to make this payment due to the sale of the investment property, but if they can’t for whatever reason, the lender may foreclose on the property.
Changing Conditions – Depending on the terms that the loan was originated with, different financial conditions on the part of the borrower can be enough to convince the lender that they need to call the loan due immediately, rather than later. This process isn’t as arbitrary as it sounds, but if the loan is called legally and you’re unable to pay, it can be cause for default.
Deterioration – If the condition of the investment property deteriorates to a level below a threshold deemed acceptable, the lender may foreclose on the property or ask for an advance of funds.
Illegal Transfer – Some contracts stipulate that the borrower must keep the property in his name. Unauthorized transfer of the property could result in a default of the loan as well, along with certain penalties.

What Happens if I Default On My Loan?

Due to the truncated nature of hard money loans, the average lender may choose to call the loan quicker than average traditional lenders, but there are still a few steps before total foreclosure.
For starters, a default or missed payment may cause the lender to increase the interest rate on the loan substantially; in some cases, even up to double. Hard money loans have interest rates that are much higher than average loans – they usually begin at 12% and go up from there – so a default can increase it to 25-30%, or even higher. A payment of $1500 can go up to $3000 or even higher, making it nearly impossible for the borrower to make the bill current. If it stays in default, the lender may choose to move on to more drastic measures.
A foreclosure occurs when the bill is called due and the borrower is unable to pay. In this event, the borrower will most likely decide to sell the collateral and keep all of the current payments as a penalty for loan default. If the borrower is close to the end of the life of the loan, this could mean several thousand dollars that are simply lost. In most cases, hard money lenders do not report a default to credit bureaus due to the cost, but they may choose to do that as well. Another option for the borrower is called “deed in lieu of foreclosure.” If the lender accepts, the borrower may give the property back to the lender instead of having a foreclosure appear on their record. Too many foreclosures can affect the borrower’s ability to secure a traditional loan in the future, although borrowing from another hard money lender may be an option. If the borrower pursues a deed in lieu of foreclosure, they must gain a release from the lender, or they could be on the hook for the property and the loan as well.

Source: wpengine, By: “What Happens If a Borrower Doesn’t Pay Back The Hard Money Loan.” Delancey Street, 23 Feb. 2018, https://www.delanceystreet.com/what-happens-if-a-borrower-doesnt-pay-the-hard-money-lender-back/

Phoenix Hard Money Real Estate Loans

If you’re interested in getting involved with real estate investing and need the capital to purchase properties hard money is a great way to get started.  Brad Loans has extensive experience in both real estate investing and hard money lending and is proud to offer Phoenix Valley real estate investors the financing they need.  It is easy to get started applying for hard money loan and Brad Loans is able to work with clients with bad credit and no credit. We are your source for hard money when traditional banks say no.  Read more about Brad Loan’s hard money loan programs or get started fill out our hard money loan application or give us a call to ask questions at 480-948-0880.

Refinancing With Hard Money Lenders

Refinancing With Hard Money Lenders

Hard money loans can be a solution for homeowners in foreclosure. It allows them to pay off the foreclosing lender with a hard money refinance giving the homeowners additional breathing room to fix their credit or sell their property and obtain long-term financing.

Refinancing Steps

Obtain a list of hard money lenders in your area. Typically, they restrict their lending activity by geographical area because they make lending decisions based on their familiarity with the local housing market. The Internet is one of the best ways to find local lenders, but you can also ask for a referral from a traditional lender. In some markets, you might be able to find a mortgage broker who has knowledge with private money options.

Investigate each hard money lender. Each lender will have its own loan application process, loan terms and fees. The interest rate and points offered for this type of loan will be much higher than a traditional loan, so it is in your best interest to find the lender that will give you the best terms. Hard money is a legitimate lending source, but there are unscrupulous lenders. Check the reputation of each lender with your local department of consumer affairs and Better Business Bureau before initiating any transaction.

Prepare your loan documentation. Hard money lenders rely primarily on the loan-to-value ratio of the house you are refinancing to make a financing decision. Consequently, you are more likely to obtain a loan if you have enough equity in your house. Gather proof of the value of your home, including appraisals, and the loan documentation for any outstanding loans. Typically, a lender will want to see some documentation to verify how you will make your loan payments. Some lenders might want to see additional documentation such as tax returns and credit reports.

Apply for a hard money loan. Download an application from the lender’s website or call the office directly to initiate the application process. Most hard money lenders design the application process to be short and quick, allowing you to have access to the loan money in as few as seven days.

File your loan documents with the lender. When the hard money loan is approved, use the proceeds to pay off the primary loan on your house. The new loan becomes your primary mortgage. Record the transaction with the local recorder of deeds.

Work to obtain long-term financing to replace the hard money loan or sell your home. Hard money is merely a short-term bridge loan. The interest rate will be too high for you to carry the loan for more than one or two years. During this time, you should work to fix whatever deficiencies exist in your financial profile that prevented you from obtaining traditional refinancing. Alternatively, sell the house, pay off the hard money loan and pocket your equity.

Moving Forward

The terms of a hard money loan typically include summary foreclosure or repossession rights. If you default on the hard money loan, you will likely not have the same options as with a traditional mortgage, so it is very important to have a realistic exit strategy to replace the hard money loan before you take one out.

When choosing a hard money lender, make sure you understand how the lender handles defaults or an inability to refinance the loan in a reasonable amount of time. Some lenders are more reasonable than others, and it is in your best interest to pick a lender that will work with you if problems arise.

Phoenix Hard Money Real Estate Loans

If you’re interested in getting involved with real estate investing and need the capital to purchase properties hard money is a great way to get started.  Brad Loans has extensive experience in both real estate investing and hard money lending and is proud to offer Phoenix Valley real estate investors the financing they need.  It is easy to get started applying for hard money loan and Brad Loans is able to work with clients with bad credit and no credit. We are your source for hard money when traditional banks say no.  Read more about Brad Loan’s hard money loan programs or get started fill out our hard money loan application or give us a call to ask questions at 480-948-0880.

Hard Money Loans For New Construction

Hard Money Loans For New Construction

Hard Money Loans For New Construction

As the real estate market grows and then fluctuates, the one constant is investors in real estate still need money so they can fund their projects. But the everchanging nature of lending has made it tougher for developers to secure the money required through traditional means.

And it is here where private lending hard money loans can be of great help. They are an important option for developers wanting to get their project underway but may not be suited to a traditional leader loan.

Hard Money vs. Traditional Lender Construction Loans

While conventional loans are issued traditionally by banks, hard money loans are provided by investors or investment groups. Hard money construction loans are secured by the real estate being purchased. They often charge higher interest rates than loans from a bank, but can close in just a few days. When considering hard money vs. traditional construction loans, you should consider the following questions:

When Do You Need The Money?

Time is often vital when it comes to teh success of the project. Funding a loan quickly can often be the difference when you need to secure a great deal. Though timelines vary when it comes to obtaining a construction loan, hard money loans tend to be quicker. While most hard money construction loans can be funded within a week, traditional lenders often take a great deal longer.

How Should Your Loan Be Structured?

Traditional lenders take a one-size-fits-all approach to construction loans. Their terms are straightforward, but there is little room for negotiation when it comes to your specific loan requests. On the other hand, hard money lenders often provide more flexible terms. This means hard money lenders can structure the loan terms in ways that benefiting everyone. In addition, they can also provide repayment schedules that are structured to meet the borrower’s individual requirements.

What Type of Loan Is Available To You?

Approval is one the most important when it comes to construction loans. Even with a good financial history, the bank may still see something in your application that indicates you aren’t a good fit for a conventional loan, such as incomplete records or self-employed work. Hard money lenders are able to take more than just the borrower or company’s financial history into account.. A hard money lender looks at your ability to repay the loan as well as how much equity you have invested in the property.

Which Loan Type Is Best For You?

If you hwere turned down for a conventional loan, then a hard money loan may be just the solution to helping you get your project funded. Similarly, if the less flexible loan structures offered by traditional lenders don’t work for you, then you may want to explore your hard money loan options. In this business, being able to quickly take advantage of deals and secure land or properties is important. While conventional loans are slower when it comes to approval and funding, hard money loans can be completed and funded quickly, allowing builders to jump on excellent opportunities.  Finally, consider which loan will give you the flexibility and terms you need to get your project off the ground.

Phoenix Hard Money Real Estate Loans

If you’re interested in getting involved with real estate investing and need the capital to purchase properties hard money is a great way to get started.  Brad Loans has extensive experience in both real estate investing and hard money lending and is proud to offer Phoenix Valley real estate investors the financing they need.  It is easy to get started applying for hard money loan and Brad Loans is able to work with clients with bad credit and no credit. We are your source for hard money when traditional banks say no.  Read more about Brad Loan’s hard money loan programs or get started fill out our hard money loan application or give us a call to ask questions at 480-948-0880.

Translate »