Private money lending is mostly when people lend their own money to professionally managed or investors real estate properties. Investors usually turn to private lending companies to fund their deals because the amount offered by a bank does not qualify for an unsecured loan or they are running out of time and cannot wait the usual three months to a year period for an unsecured loan. In such cases, the private lending companies act as a financial partner for the investors by providing capital to purchase these properties.
Private money lending companies provide attractive mortgage deals to potential home buyers. The mortgage offered by these lending companies is a lot cheaper than the local property market. They take a big risk in lending money to the first time home buyers because, in the recent past, many homebuyers have defaulted on their mortgages. These lenders have to offer generous loans to retain the trust of the investor.
The Hard Money Lending Companies are categorized as investment-grade banks that are registered with the Department of banking. To qualify, the investor must be a resident of this country and the money lending company has to be registered with the Department of escrow. A minimum deposit is required before the deal is closed.
Private money lending companies usually use two types of financing – hard money lending and commercial loans. The hard money lending companies borrow funds from investors. Commercial loans are provided by bank loans. Hard money lenders use some credit unions as sources for the funds. The interest rates are always slightly higher than the local banks.
Commercial loans are the major source of funds for most private hard money lending companies. Commercial loans are taken from banks and credit unions. In some cases, the suppliers may also use some other financial institutions like the Pawn Shops. The suppliers are in a better position to negotiate a lower interest rate with these financial institutions. The suppliers are in a better position to demand a reasonable price for the collateral.
There are some private money lending companies that lend online. The borrower applies for an online loan using his/her personal computer. There is no paperwork involved. An online form is submitted to receive the approval of the loan amount.
Money lending companies are offering commercial real estate loans for the first time in almost every state. The investors can choose from fixed-term commercial real estate loans to adjustable-rate commercial real estate loans. The borrowers can choose to get one or more financing options depending upon their needs and requirement. The maximum loan amount is only $75000.
Commercial real estate loans are classified into two types: one is a secured loan and the other is unsecured. Secured loans are for a larger amount and they can be renewed with additional amounts as and when required. For secured loans, the borrowers can choose to sell the property as a result of default repayment by the borrower. On the other hand, an unsecured loan is made for smaller amounts. The lending rates are much higher in the case of unsecured loans. Therefore, it is advisable to go through a professional real estate financing company.
Most of the hard money lenders are registered with government agencies and they follow strict legal regulations to ensure the safety of the borrowers. They use collateral to secure the loan amount with the potential of recovery in case of default. The hard money market has developed due to the increased number of individuals with capital to lend to individual investors. There are many private lending companies that provide competitive hard money loan products to meet individual investor needs.
Hard money lending companies also provide comprehensive financial information, including loan amount, terms, interest rates, collateral, and private lender’s reputation. Many private lenders provide various loan products such as buying down, mortgage refinances commercial real estate investment plans, tax liens, partnership deals, joint ventures, investment trusts, business plans, and more. It is important to compare loan quotes from different private lenders so that individuals can find the most suitable lending product.
There are many professional financial advisors, brokers, and bankers that provide assistance to individual investors to select the appropriate hard money lending product. It is important to choose a private money lending company that has sound experience and is backed by reliable financial institutions. It is advisable to compare loan quotes from several private money lenders before making any commitment. Most investors fail to get the best deal because of their lack of research and knowledge when it comes to selecting an appropriate private money lending company.