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Hard Money Funding Is It Right for You

January 16th, 2010 Posted in Articles

Hard Money Funding? You have searched long and hard for the perfect property but now you need to find funding. The conventional methods of finding the money you need won’t work because the property needs some heavy repairs. Someone mentions that you should try hard money funding. You are willing to look into any options available but what is hard money funding exactly?

Hard money financing may work for you but this type of loan is expensive. Hard money lenders usually expect the down payment or loan to value to be fifty percent and as many as eight points as well. The hard money type of loan is primarily from private investors or groups of investors. Other more traditional sources for loans like bank funding unusually try to avoid this type of loan. To define hard money in terms of dollars it means that a loan for $100,000 would be about $1500 per month plus $8,000 in points right up front. The hard money loans are handled on a loan by loan individual basis. These can be loans that go on for years but most likely the lender will expect a balloon payment between one and three years.

Investors in real estate like the hard money funding opportunities because they want to fix up properties that they buy and quickly do a turn over so in these cases the loan to value is actually based on the resale value the property is expected to have. This means that the investor is able to get a full one-hundred percent loan for the purchase and the repair of the property. The owner of property that is about to fall into the state of foreclosure can take advantage of this type of funding. This will give them the time to fix their credit rating in order to get conventional refinancing or it can give them a longer period of time to sell the property.

Just like any money lender the hard money lender expects to make a profit on the money that they lend whether the borrower makes a payment or not. If you decide that this is the right loan for your needs be sure that you will be able to meet the obligations set by the loan. Also, before you accept a contract for hard money funding you should thoroughly check the references of the lender and be sure that all of your questions and concerns have been completely addressed. Be sure that everything discussed is clearly stated in writing.

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