Exactly what is a private hard money lender?
by Tim Manni
Hard money, or private lending, is gaining popularity as financing remains tight. But borrowers need to know exactly how it works before they sign for a loan.
Private hard money lenders are often the only alternative when banks and brokers are unwilling to lend. In today’s economy, they are understandably in high demand.
Exactly what is a private hard money lender? It is a lender that does not use conventional standards to extend credit to borrowers. While banks and brokers evaluate credit history, income and debt to determine creditworthiness, private hard money lenders will often provide a short-term loan based on the underlying value of the property. Though they sometimes are difficult to find and their terms can be steep, private hard money lenders are often a good option when traditional financing is out of the question or when cash is needed quick.
Investors looking for foreclosure bargains and homeowners looking to buy some time are two groups increasingly pitching private hard money lenders.
Hard money for foreclosure investing
Recent studies reveal that more people are buying foreclosures investing than ever before, and many are using private hard money lenders to complete their purchases.
Jason Parker, operator of www.ShortSaleSuckerPunch.com, states, “Our clients oftentimes use short-term hard money to lock up hot deals that are too good to pass up. Then, they either partner up with another investor to refinance the deal or sell it to an end buyer, leaving plenty of profit on the table for everyone involved.”
Parker says many of his buying strategies don’t even require hard money, but knowing where to find it quickly is an added layer of security for investors.
Hard money to avoid foreclosure
Homeowners trying to avoid foreclosure may take on hard money financing to gain time to sell the property. If you have significant home equity, your goal is to sell your home in a way that pays off the lender and maximizes your proceeds. A foreclosure sale on the courthouse steps does not accomplish those goals. So you refinance with a hard-money lender (some offer very short terms and require no payments), market the property, and hopefully sell it before re-defaulting on the home loan.
Be sure to continue reading the rest of this article, “Hard to get financing? Walk softly into hard money lending.”
