Hard money loan is a loan agreement that uses the package of a parcel of land as collateral to secure an agreement to lend the currency. However, you will not easily be able to find these loans, because not all financial institutions are willing to give it. Usually these loans are not provided by the national credit companies and banks, of course, but the company’s private investors who are in a specific location where the transaction is in progress. This type of loan agreements is similar to what is known as a bridge loan to loan money on properties that the transition of the other zoning category or another category of use. In both cases, the hard money loan agreement has very high interest rates, and is based typically on a ratio of about 60-70 percent of the assessed value of real property, despite the high volatility of the mortgage market; sometimes it can drop as a percentage, as low as fifty percent. If a piece of land worth two hundred thousand dollars, two types of borrower into a loan agreement will offer approximately 120-140,000 dollars of borrowed money, or as low as one hundred thousand dollars.
You need to know that hard money loan will often have a 15-25 percent interest rate, and sometimes as much as thirty percent. In addition to high interest rates, loan agreements also can take three to six points for the cost of formulating the treaty. On a plot of land of two hundred thousand dollars, six points would be twelve thousand dollars in origination fees, a very exorbitant amount. The loan agreement can often occur only within seven working days and sometimes it can be formulated as an interest-only loan.
A real estate investor is usually a prime candidate for a potential consumer loans hard money loan offered by the company. For example, investors discovered what is believed to be the choice of land and want to eventually build a community of homes, so seek out a lender that will lend for fifty to seventy percent of the appraised value of real estate. The loan agreement may require that real estate investors put up twenty percent of his own money while other lenders may be sought from the remaining land. Online search will reveal a number of companies willing to provide short term hard money loan. Short term will be defined as one to three years, but some companies do not want to deal with a number of loan agreements fewer than one million dollars.