At times, conditions for borrowing funds become too hard for borrowers. This may be because of their very bad credit as they have multiple credit problems and so lenders think such a borrower is a high risk and should be avoided. The reason for a conventional lender refusing loan may defer from borrower to borrower. So a conventional loan is not easily available. In such a situation, you still come across lenders who are willing to fund your requirements. Such lenders will provide you hard money real estate loans so that you can invest funds in commercial properties.
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These loans are ideal solutions for those borrowers who find it difficult to get funds from conventional sources. Or, these loans are availed when the borrower is going through legal problems.
The main feature and attraction of hard money real estate loans is that it makes borrowing funds easier. This is because the lender sets aside all documentations and verification that a normal loan requires. So the lender just does not look into borrower's income, employment, credit, tax returns, and assets. All other details like foreclosures, bankruptcy, judgments, unreported income, source of down payment etc. a borrower's bad credit history is completely ignored by the lenders in offering loan for investing it on real estate.
These loans therefore serve as last resort for borrowers with lots of problems. But some time those borrowers with fewer problems also opt for the loans, if they want a loan without delay for instant investment of funds.
Collateral is any commercial property that has at least 20 percent equity in it. The loan amount ranges form $150,000 to $20 million depending on equity and property value. But these loans carry very high interest rate. This is primarily because usually problem borrowers are the customers and risks involved for lenders are high.
Repayment runs from few months to 20 years. Typically these loans range for two to three years. Such a shorter duration is mainly because longer term will make the loan too expensive for the borrower. These loans therefore are meant usually for easy access to the funds and early coming out of the loan.
As far as sourcing is concerned, every lender will not give you hard money real estate loans. Only some private lenders are in this field. So you will have to make a good search. Compare the lenders for a suitable deal.
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