If you’re in the market for financing, you may have considered hard money loans. Miami is just one area in which Infiniti Funding provides such loans. You probably already know that a hard money loan is a loan secured with real property. Typically issued by a private firm, hard money loans have more risk associated with them because the borrower typically cannot qualify for a more conventional, traditional means of financing. A hard money loan might be an asset-secured loan (and it may have a relatively high interest rate based on risk), which is one of the reasons hard money loans offer value to customers who cannot secure more traditional means of financing for a project or purchase. A hard money loan could also be one that involves a foreclosure, or a situation in which a mortgage is in arrears. If that happens, it falls under the heading of bridge financing, which is a type of hard money loans. Miami is just one city where realtors and investors are turning to hard money loans and bridge loans to meet their financial needs.
Leigh Anne of Bankers South explains that hard money loans like bridge loans have significant advantages. “Bridge financing,” she writes, “as the name suggests, serves as a ‘bridge’ to another transaction. these loans have assisted real estate projects and have also allowed borrowers to pay off loans or take advantage of new opportunities quickly. Bridge loan financing is a smart alternative for borrowers when traditional lenders are moving too slow or are too rigid. Hard money lenders… offer speed, a professional service, and convenient short-term financing, helping investors to take advantage of great opportunities that do not fit easily into the tight structure of institutional lending. You do not miss out on an opportunity when a traditional lender (i.e. a bank) cannot close the deal in a timely fashion. Bridge loans are fast. When time is of the essence, a …bridge loan can make all the difference in securing an opportunity. The bridge loan holds you over until the property is sold. If you need to sell your investment property now, but know it may take a few months on the market to sell, a bridge loan is a great option. …There are no concrete specifications for a bridge loan, as there are for conventional loan types. The bridge loan is provided by the lending company based on their own judgment and if it makes sense.”
Speaking of hard money loans (Miami based or otherwise) more generally, Yanni Raz writes, “Qualifying for hard money loans tends to be more straight forward than traditional loans. When looking at hard money loans, remember that hard money lenders are themselves investors. When hard money lenders evaluate loan opportunities they are looking to maximize returns and minimize risk – just like every investor. While hard money lenders would love their borrowers to have great credit, it isn’t the number one factor they use to evaluate lending opportunities. The top factors hard money lenders tend to look at are property fundamentals and equity. They want to know that in the event the borrower defaults, and they have to foreclose on the property, that they will be able to recover their investment. They will look at things like the rental marketability of a property, cash flow, and so on. This is great for investors, because if you find a great investment opportunity, it is likely something that hard money lenders are going to be willing to fund. Along with property fundamentals, hard money lenders are also looking for equity. Typically hard money lenders aren’t going to lend more than 70% of a property’s LTV. For investors, though, there are hard money lenders that will lend based on repaired or remodeled value. Again, hard money lenders can be a lot more flexible than traditional lenders. As long as an investment makes sense to a hard money lenders, they may fund the deal. They certainly have some guidelines they like to use and keep to, however, at the end of the day they can be flexible if they see an investment opportunity that makes sense.”
Benny Kass, writing in Inman, says, “Hard-money lenders do not rely on the creditworthiness of the borrower. Instead, they look to the value of the property. The lender wants to make sure that if the borrower defaults, there will be sufficient equity in the property over and above the amount of the loan. Accordingly, you will not get a hard-money loan of 80 or 90 percent loan to value; typically, they will range from 50 to 70 percent loan to value. Such loans are considered ‘loans of last resort.’ If you are unable to get a conventional loan from a bank or mortgage broker, you may be forced to negotiate with a hard-money lender, who often are private individuals loaning money from their pension plans. And beware: Those loans are more expensive and often have more onerous terms than the standard mortgage backed by the federal government, Fannie Mae or Freddie Mac. Who typically gets such a loan? If you have bought a house and haven’t yet sold your existing one, you might get a hard-money bridge loan. They are typically short-term. Other users are homeowners with bad credit but lots of equity in the home who want to avoid foreclosure. …There are many legitimate hard-money lenders. However, as in every profession or industry, there are some bad apples. Some hard-money lenders are loan sharks whose sole objective is to take your house away from you. If you need a short-term loan and decide to confront a hard-money lender, please have your attorney review all of the legal documents the lender will ask you to sign. You want the money, but you don’t want to lose your valuable home.”
According to “Foreclosure University,” hard money loans and their terms vary from lender to lender. “It used to be that hard money lenders would lend solely based upon the deal or property at hand,” says the piece. “They would only lend up to a certain percentage of the fair market value of the property, that way in the event of default, the hard money lender would profit handsomely if they had to foreclose or sell to an end buyer. Now, you will find that many hard money lenders, if they want to stay in business, require more than just equity to qualify. This is because the laws now are favorable for consumers. Consumer protection laws, time consuming and expensive court procedures, and so on have forced some hard money lenders to become even harsher when applying for a loan. It is good to know what the terms are when dealing with a hard money lender so you can find the one that will fit your needs. Here are some of the terms you can expect to see. Typically they will only loan you up to 70% ARV (after repaired value). This means that a hard money lender can loan you up to 70% of what the home is worth in repaired condition. So if you find a home worth $45,000 in the condition it’s in, and needs $20,000 in repair work, and after it is repaired the current fair market value is worth $100,000, then typically they can lend you up to $70,000, which would cover the cost of the house and the repairs.”
Ray Cole, writing in SF Gate, explains, “A hard money lender can provide financial resources for property owners who need a non-traditional loan. Qualifications for a hard money loan are more relaxed than conforming bank products, as hard money lenders are lenient on personal credit. According to the Bank Rate website, “They charge interest rates and fees that would make conventional borrowers cringe and often base lending decisions on whether there will be enough equity in their subject homes that they can foreclose and still turn a profit.” You may qualify for a hard money loan with bad credit, a pending foreclosure or income that is difficult to prove. Determine your hard money needs. Many loan types are available for hard money financing. There are hard money lenders that specialize in foreclosure rescue, investor financing and commercial properties. Most hard money lenders will advance cash loans for homes, buildings and land, provided enough equity exists.”
Clarence Walker, in Newsblaze, meanwhile, explains, “Traditional banks and other lending institutions provide financing for those who qualify, but hardship such as bad credit, unemployment, a foreclosure, repo, or income deficiency will often leave a person in despair. This is where Private Hard Money Lenders come in. Sources for ‘hard money loans’ usually consist of private lenders, insurance companies including private investors who offer funding when a person is unable to get a standard loan. …Hard Money lenders have different requirements, but borrowers need to be careful.
Hard Money Lenders make all kinds of loans, and particularly high on the list are property loans, commercial business loans, loans to investors seeking to purchase and flip houses and businesses, with sufficient equity. From a revenue perspective, the key focus of Hard Money Lenders is the fact they’re more concerned about asset valuation and loan-to-value ratios. Most lenders who fund mortgage loans only lend between 50% to 70 % of a home’s value, although banks may lend as much as 80%, and government funded loans can increase upwards to 96.5%. Private money lenders aka Hard Money also fund short term capital, better known as bridge loans. A good deal on property can be used as collateral for a Hard Money Loan.”
Walker goes on to explain that, despite negative images of predatory lending, hard money loans (Miami area business being only one area to find them) nonetheless provide a valuable solution to those who can’t get financing otherwise. “Part of Hard Money Lenders’ portfolios involves making immediate loans for homeowners or business owners facing foreclosure. It is a vital way to save one’s home or business but some experts caution people to make ‘hard money’ lenders as a last resort,” he says. “Another benefit for an investor to obtain a ‘hard money’ loan is the fact that the turnaround is much quicker than a traditional bank loan that may take up to 30 days. But since the investor may have a “hot deal” that can turn quick profits, the best route to take is to apply for a “hard money” loan, which can take no longer than a few days. Hard money loans are not always a bad choice depending upon the circumstances needed to obtain an immediate loan to pay off a debt or invest in a great profitable deal that’s profitable enough to repay the ‘hard money’ loan and still net a profit. Most important, is that it is vitally necessary for a borrower to be fully aware of knowing how to comply with the process to obtain a ‘hard money’ loan.”
Far from being a bad choice, hard money loans might well be the only solution that meets your financing needs. Yanni Raz writes, “Searching for hard money lenders is easy. …Every hard money lender is going to have their ‘bread and butter’ deals. Just like with venture capital firms, had money lenders prefer to stick to the type of investment they know. You might have to talk to a number of lenders before you find one that is interested in the type of investment you are pursuing, but keep at it. If the investment opportunity is good enough, you should be able to find a lender that will work with you.”
We at Infiniti Funding can take the guesswork out of this for you. We can provide you with the financial solutions you require, some of which may be hard money loans. Miami businesses are just some of the markets we serve. Contact us today for more information and to see how we can tailor a financial solution to meet your needs.