In this economy, everyone's resources seem to decrease at a fast. While struggling to pay the bills each month, you'll find some of them are still past due. In this case, hard money loans are the best alternative to gain some financial stability. A hard money loan is money a homeowner borrows against the value of their house.
Financed through private hard money lenders, the repayment interest rate is much higher than loans acquired through traditional sources. With the possibility of a repayment period lasting several years, homeowners generally use the money to finance a big project or pay off a large amount of debt. Some use the loan to pay off a current home foreclosure.
The structure of a quick cash loan is based on a percentage of the home's quick sale value. Commonly called today's purchase price, the loan to value amount is what the lender can expect if the borrower defaults and the home sells within four months. Although most lenders require a good credit rating to qualify, this type of loan is based on the home's value. Lenders cap the loan limit between 60 and 70 percent of its current market value.
After defaulting on the loan, lenders have the right to legally repossess the home and sell it at a foreclosure auction. The home is priced to recover the remaining loan balance plus any other fees. Lenders who are a first lien holder will receive payment first after the home is sold. Junior lien holders receive payment after the other creditors.
However, because of the asking price, most homes do not sell. It is listed a part of the REO properties for sale. The home becomes a non-functioning asset because it is not used in the business's every day function.
This type of loan lenders is unregulated by federal or state government. However each state does have an interest usury law in effect. Typically starting at 11.5%, each state regulates the maximum allowable interest rate.
Hard money loans are available for commercially owned property as well. Commercial lenders are similar to bridge lender programs. However, the lender view commercial property as a higher risk and charges a higher interest rate with a lower loan value. Generally investment and properties that are not occupied by the owner qualifies for this loan. Just as homeowners, commercial property owners usually apply for this type of loan when they are in financial distress.
About the Author
By Jerri Eide
Pacific Mortgage Fund offers excellent hard money loans. You also will find REO properties for sale when you visit us on the Web today.
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