subject: What Is Hard Money Lending? [print this page] In the world of finance, there are two terms related to lending: hard money lending and soft money lending. Soft money loans are usually those with variable payment program plans and borrower-friendly terms; whilst hard money loans are usually those with relatively strict terms and payment schedule plans, and everything is completely up to the lending company.
Hard money lending is usually made available by both private and financial lenders. Private lenders are affluent individuals who would like to make some profit by lending their money to individuals they consider good payers/borrowers. Commercial lenders, on the flip side, are financing companies which lend money as their business to those who wish to get a loan. It is usually real estate investors who borrow this kind of loan because in their case, it becomes a win-win situation. The loan providers are certain to get their profit from the money they put out, and the borrower will also bring in a quick profit from the property they decided to invest on, while being able to meet the payment schedule and terms of the lender. So basically, even though the terms and payment schedule might be fairly strict and rigid, there are still many who decide on this simply because this is a quick way to receive finances. The minute your loan gets approved, you will get the money right away.
Given that with hard money lending many of them are private lenders, they will have their own distinct standards for the loans approval. The real estate investors experience can be quite a significant factor impinging on the approval of the loan, but there are other issues to consider also. That is the reason why a good rapport with lenders is essential for real estate investors. Building a solid relationship with them can be done because private hard money lenders are individuals, and so long as they've got a good relationship, the borrower knows that when they find a great opportunity, he or she will have the required money. On the other hand, for those new to real estate investing, finding these individuals is probably not easy to achieve; although, they are usually looking for new opportunities to loan their money. Hence, if youre a newbie, keep your eyes and ears open for these.
Just to get a concept regarding hard money lending, these are usually short-term loans starting from six months to five years, depending on the conditions of the loan provider; as well as the regulations used for each loan is usually from one half to around three quarters of the property worth and also the post fixes. In terms of the points, it's going to be starting between two to ten on top of the loans sum. Again, all these conditions will depend on the lender - its his or her call. Then again, it is known that when hard money loans are usually financed by private sources (individuals), the terms usually are sterner than commercial lenders. Albeit, once the investor has located the ideal financial institution intended for his needs and vice versa, then hard money lending is definitely favorable for both parties.
by: Jared T. Coleman
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