Hard money loans are known by many names. You may be familiar with the other names hard money loans go by such as “private money loans”, “hard equity loans”, “equity only loans”, “subprime loans” or “portfolio loans”. No matter what you call them they are filling the huge gap left by conventional lenders for investors and home owners that have equity and need to unlock the cash from their homes.
We will refer to these loans simply as hard money loans. There are many myths and misconceptions about hard money that should be cleared up. The first and foremost of these myths is that a private investor is making a loan because he wants to foreclose and get access to the equity in the home. While there may be some cases where this is true, the vast majority of hard money investors are looking to make regular monthly interest profits and NOT go through the hassle of foreclosing on your home. Should the lender have to foreclose they are looking at many months where they will receive no profits on their funds.
The foreclosure process can take up to a year in parts of Florida where the banks are bogged down with hundreds or even thousands of bankruptcy and foreclosure cases in addition to their normal workload. Once the lender finally gets a foreclosure done the property is then sent to a public auction. At the auction the lender would then have to bid on their own property against other investors that will want to acquire a house with plenty of equity. On top of having no profits for many months, legal fees, and now having to bring money to the table just to acquire the home from other investors… you can see how a hard money lender would want to do everything in their power to make sure you keep making payments where they will receive regular profits versus having to take back the home.
People use hard money loans for a variety of reasons. As mentioned previously, conventional and Government lenders are continuing to further tighten their credit and underwriting guidelines making it more and more difficult for investors and homeowners to get access to the equity in their homes. Some of the most common scenarios we encounter from people using hard money loans include:
- Inherited a property that is free and clear and have no credit or bad credit to get approved to pull cash out of it.
- Paid cash for a property recently and need to get cash out of it (conventional and Government loans require 12 months seasoning on title where hard money loans have no seasoning requirement at all)
- Already have more than four properties financed (conventional and Government loans will now allow more than four properties to be financed or t hey will not approve a loan, hard money loans have no financed property limitations)
- Property Types that conforming and Government loans don’t finances are allowed with hard money loans such as mobile homes, raw land, condos and town homes.
- Investors looking to purchase a home and need to close fast (conforming and Government loans can take 30-45 days but hard money loans can close in 3-5 days.
Not all hard money loans are the same. There are two different types of hard money loans that you can consider using:
1. No Document Hard Money Loans – These are true no documentation loans. The lender is lending money based strictly on the amount of equity you have in your home. These loans close very fast as the only thing to do is arrive at a fair value on the home and ensure the title work is in order. Interest rates on a no document florida hard money loan can run between 12%-15% on a 10-30 year fixed rate mortgage.
2. Full income documentation loans – These loans allow the home owner to get interest rates closer to 10% on a 20-30 year fixed rate mortgage. These fully documented florida hard money mortgage loans allow investors and home owners that can prove their income to receive better terms. These loans help fill the gap for investors with more than four properties financed, investors that need to close quickly on their home using hard money, and home owners with poor credit that banks will not finance.
One of the major advantages that mortgage brokers have in today’s market is that they have access to a wide variety of lending sources for all types of loan programs. A bank or credit union will not be able to offer anyone a private money loan. These loans are only provided directly from the private funding sources or as is normally the case, through mortgage brokerages that are used to dealing with funding hard money loans.
If you have been considering a hard money loan or have been turned down by the bank but have equity in your home, we highly recommend calling or filling out the online inquiry form right now. By this time next week you can have your equity in your bank account!
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Tags: florida equity loan, florida hard money, florida hard money lender, florida no doc, florida private equity, florida stated income, free and clear refinance, hard money cash out, hard money florida
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I am a Mortgage Broker in New Jersey.I have a Client that has to mover very quickly to take advantage of a Bank owned super property.
The home was originally an $895,000 value.It is a two story stucco,with tiled roof containing 3700 square feet of living space.It is very close to canal in Cape Coral.
Her offer is $499,000 she is putting $100,000 down and needs a loan for $399,000 for 1 year. If need be, she can cross collateralize with her home here in NJ which is valued at $1,100,000, and Shore Lending is making her a refinance of $750,000 which is in process.
Please advise as we only have a week to act.
Thank you,
Regards,
Arnold M.Lubliner
Managing Director