Hard money banks are just another kind of mortgage brokerâ€"or are they? Well, perhaps. Following are a few ways hard money lenders are basically absolutely different from regular mortgage brokersâ€"and what that can mean for real estate investors.
Non-public lenders vs. Establishments
Regular mortgage brokers work with several establishments like big banks and mortgage firms to order mortgages, and make their cash on points and certain loan charges. The bank itself tacks on more closing fees and costs, so by the time the closing is over, the borrower has paid anywhere from a couple of thousand to 1 or 2 thousand greenbacks in fees, points and other costs. And the more brokers are involved, the more points the borrower pays.
Hard money banks, from the other viewpoint, work without delay with personal lenders, either individually or as a pool. If the hard money lender works alongside the personal lenders individually, then for each new loan application, the hard bank must approach each personal bank until s/he has raised enough money to pay for the loan. The cash is then put into escrow until the closing.
Alternatively, rather than approaching private banks individually for every new loan, the hard funds provider may place private money from the personal lenders into a poolâ€"with particular criteria about how the cash may be employed. The hard funds provider then uses predetermined terms to decide which new loan requests fit those standards. The loan servicing company that collects the loan payments pays them directly into the pool, and the pool pays a proportion of those payments back to the private banks.
Different types of propertiesâ€"investment vs. Owner-occupied
While regular mortgage brokers can work with home properties or commercial properties, hard money lenders vastly like investment propertiesâ€"also known as "non-owner-occupied" properties (NOO for short). That's because "owner-occupied" (OO) properties have restrictions on how many points the hard bank can collect (ex. A maximum of 5 points), and the term must be at least 5 years.
With NOO properties, hard money lenders can charge higher points and fees and offer loans for shorter terms, sometimes even one year or less. While that may seem dodgy and expensive, the profit from one good "flip" exchange can easily make up for higher loan costs.
Understanding of unfair lending laws
Owner-occupied (OO) real estate properties are liable to what are known as rapacious lending lawsâ€"a set of laws engineered to protect customers, particularly the under-educated, minorities and the poorâ€"from unscrupulous and prejudiced lending practices.
Hard cash lenders must be fully well informed of both Fed. and state predatory lending laws. And non-public lenders will only work with Singapore money lenders , because a regular financial consultant usually isn't acquainted with inequitable lending laws and may make a screw up that gets his license suspendedâ€"and may even jeopardize the non-public lender's loan.
Saving money with hard money banks
Now that we've discussed some of the variations between hard cash lenders and typical brokers, you can see some of the reasons for using hard cash loans for investment properties that you plan to flip or rehab and resell. Here's another reason: by coping with a tough bank who has direct access to private banks (rather than several layers of brokers), you could be saving yourself thousands of dollars in points and additional costs.
Similarly, employing a hard money lender will help you swiftly obtain the loan you need, with the term you need, and with no risk to your private credit. And if you can develop the right sort of relationship with the right hard money lender and private lenders, you can also be a part of the "inner circle" of real estate investors who seem to learn more about all the neatest deals firstâ€"and are building real wealth.
Non-public lenders vs. Establishments
Regular mortgage brokers work with several establishments like big banks and mortgage firms to order mortgages, and make their cash on points and certain loan charges. The bank itself tacks on more closing fees and costs, so by the time the closing is over, the borrower has paid anywhere from a couple of thousand to 1 or 2 thousand greenbacks in fees, points and other costs. And the more brokers are involved, the more points the borrower pays.
Hard money banks, from the other viewpoint, work without delay with personal lenders, either individually or as a pool. If the hard money lender works alongside the personal lenders individually, then for each new loan application, the hard bank must approach each personal bank until s/he has raised enough money to pay for the loan. The cash is then put into escrow until the closing.
Alternatively, rather than approaching private banks individually for every new loan, the hard funds provider may place private money from the personal lenders into a poolâ€"with particular criteria about how the cash may be employed. The hard funds provider then uses predetermined terms to decide which new loan requests fit those standards. The loan servicing company that collects the loan payments pays them directly into the pool, and the pool pays a proportion of those payments back to the private banks.
Different types of propertiesâ€"investment vs. Owner-occupied
While regular mortgage brokers can work with home properties or commercial properties, hard money lenders vastly like investment propertiesâ€"also known as "non-owner-occupied" properties (NOO for short). That's because "owner-occupied" (OO) properties have restrictions on how many points the hard bank can collect (ex. A maximum of 5 points), and the term must be at least 5 years.
With NOO properties, hard money lenders can charge higher points and fees and offer loans for shorter terms, sometimes even one year or less. While that may seem dodgy and expensive, the profit from one good "flip" exchange can easily make up for higher loan costs.
Understanding of unfair lending laws
Owner-occupied (OO) real estate properties are liable to what are known as rapacious lending lawsâ€"a set of laws engineered to protect customers, particularly the under-educated, minorities and the poorâ€"from unscrupulous and prejudiced lending practices.
Hard cash lenders must be fully well informed of both Fed. and state predatory lending laws. And non-public lenders will only work with Singapore money lenders , because a regular financial consultant usually isn't acquainted with inequitable lending laws and may make a screw up that gets his license suspendedâ€"and may even jeopardize the non-public lender's loan.
Saving money with hard money banks
Now that we've discussed some of the variations between hard cash lenders and typical brokers, you can see some of the reasons for using hard cash loans for investment properties that you plan to flip or rehab and resell. Here's another reason: by coping with a tough bank who has direct access to private banks (rather than several layers of brokers), you could be saving yourself thousands of dollars in points and additional costs.
Similarly, employing a hard money lender will help you swiftly obtain the loan you need, with the term you need, and with no risk to your private credit. And if you can develop the right sort of relationship with the right hard money lender and private lenders, you can also be a part of the "inner circle" of real estate investors who seem to learn more about all the neatest deals firstâ€"and are building real wealth.
About the Author:
Tim Kelly is a guru in finance having completed his LLM in Finance from Institute for Law and Finance at Frankfurt College. To Find line of credit , simple company loan, 24hr loan in singapore
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