Sage-Tips

How do private money lenders get their money back on a bad deal?

Instead, the funds come from individuals or investors who lend money based primarily on the property you’re using as collateral. If anything goes wrong and you can’t repay the loan, hard money lenders expect to get their money back by taking the collateral and selling it.

Can a hard money lender foreclose?

Hard-money lenders are quick to foreclose when the borrower fails to cure the loan. Since the entire property was used as collateral, any portion of the loan amount that was paid back is forfeit. For example, if a business owner paid back $50,000 of a $65,000 loan, he lost the entire $50,000 paid.

Is a hard money lender a private lender?

Hard money lenders are private companies (or investors) offering asset-based loans that borrowers secure with real property.

What is the difference between hard money lender and private money lender?

Private money lenders typically are not organized money lenders and are not usually licensed to loan money. Hard money lenders, on the other hand, are organized money lenders and are usually in some way licensed to loan money. Hard money lenders typically have lending criteria.

Is private lending safe?

Rates charged are risk-based, and private loans are often risky. Any borrower dealing with a private lender is usually doing so because they have exhausted all other options. Due to the increased risk, most private-lending deals pay 10-20 per-cent interest.

Can a private lender foreclose?

The private lender must provide all necessary documents to the homeowner, and only when the lien or loan goes into default do these foreclosure procedures usually commence. However, if the homeowner does not have the money needed to make up for the default, he or she may be pushed through foreclosure and lose the home.

What is a hard default?

Hard defaults arise when the sovereign repeatedly chooses to not pay over the course of many years. Rather, autarky-like conditions arise endogenously as the shocks leading to default result in higher spreads than the sovereign is willing to pay.

How does a hard money lender make money?

As a hard money lender, you make money off other loan costs and fees. Underwriting fees, which are charged to evaluate a borrower’s likelihood of default, can earn you another $750 to $2,000. A loan-processing fee adds several hundred more dollars to your income.

What’s the difference between hard money and soft money?

Soft money (sometimes called non-federal money) means contributions made outside the limits and prohibitions of federal law. On the other hand, hard money means the contributions that are subject to FECA; that is, limited individual and PAC contributions only.

What is a hard lender?

A hard-money lender provides short-term loans to individuals purchasing residential or commercial real estate. Investors use hard-money lenders to acquire investment properties relatively quickly. Hard-money lenders are considered private lenders, and do not use conventional standards to extend credit to borrowers.

What happens if you default on a hard money loan?

If you took out the hard money loan because your credit was too weak for soft money, defaulting will make things even worse. In some states, your lender may be able to sue you for whatever part of the mortgage the foreclosure sale didn’t cover.

Do hard money lenders focus on distressed borrowers?

Some hard money lenders do focus on distressed situations such as when the borrower has another loan in default and needs to refinance. This is particularly true for commercial bridge loans. In the single family residential arena, most hard money lenders shy away from distressed borrowers who are owner-occupants.

What happens when a hard money lender goes to court?

If your state requires a lender to go to court to foreclose, the hard money lender will have to notify you you’re in default before he files a foreclosure suit. He must then notify you of the suit. Then comes a judicial hearing to decide if he can take your house. In some states, this process can take more than a year.

Do you have to be personally guaranteed a hard money loan?

Some lenders may require that a hard money loan be personally guaranteed by the borrower, although there are instances where lenders are willing to offer no-recourse loans based on the borrower’s history and the appeal of the specific opportunity. What are typical hard money lenders terms?