The Hard Money Loan is the asset based lending, borrower pledged their valuable asset to secure the loan. Normally, almost all lenders will lending the loan based on the LTV (loan to value) ratio to determine the amount lend to borrower. They often will lend not more than 65% of the asset's value.
The loan terms are vary from lender to lender, sometimes it could be very long period or as short as 3 years. Is depend the amount and interest rate offer by lender, it will significantly affect the loan term. The loan amount are ranged from $50,000 to millions dollar. If the amount borrower asks for is too large, they might be require to put in more valuable assets to secure the loan.
This loan is associated with various upfront or finance fees, and the interest rate will be higher than sub-prime lending rate. In order to speed up the loan process, borrower shall be ready of all relevant documents such like bank statement, employment history and monthly income slips, agreement of the asset and etc.
Nowadays, the qualification process of this loan has been changed as other loans. The primary criteria is still based on the value of assets pledged, but credit score of borrower must be at least 600 and above. Other requirements are 2 years W-2 forms and/or income tax returns, and cash reserves of 5 to 10 percent of the value of the property.
When you tied a relation with hard money lender, make your payments on time to maintain a good manner. You may need it again in the future.
Beside rate, terms and conditions, there is 1 more thing to be aware - the prepayment penalty. Select the lender with minimum fine, the penalty will only be impose within a period (locked-in period) stated in the agreement. After the period, you may do an early settlement.
For other loans information and advice, please check out Various Loans Guide instead Hard Money Loan
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