Hard Money Loans Clearwater
Hard money loans, sometimes called a “private money loan” are funds lent from a private investor like a hard money lender, not a bank. This type of loan is for:
- Investment Properties
- Commercial Properties
- Residential Rental Properties
Hard money loans CANNOT be on your primary residence.
These private loans are in high demand today for a variety of reasons. Perhaps a property is available, but the interior or exterior is in rough shape so a conventional lender would not make the loan.
Or maybe an investor wants to purchase a piece of property now, but he already has a bunch of houses that are financed. In that case, no lender will loan to him because he has too many mortgages (more than 10).
Maybe a buyer wants to purchase a home as a rental, but they don’t have any credit, or their credit is poor. Another scenario could be a commercial property owner is in trouble, but their credit score isn’t the best. So even though they have equity in a property, the bank won’t help them. So, getting cash out of a property is the perfect solution to solve their problem and that’s where hard money loans come in to play.
The Cost of Hard Money Loans
Because this type of loan has more risk for hard money lenders, hard money or private money loans
- Cost more and have higher interest rates
- Hard money loans are typically issued at much higher interest rates than conventional commercial or residential property loans and are almost never issued by a commercial bank or other deposit institution.
They are similar to a bridge loan, which usually has some of the same criteria for lending as well as similar costs for the borrowers.
But, they have their purpose and thus are becoming more and more in demand especially in and around Pinellas and Hillsborough Counties where property investing is booming.
Requirements For a Hard Money Loan in Clearwater FL
It used to be the credit score of the borrower was not significant, that is changing today. At Money Street Mortgage we look at a few main things:
- Credit – although the credit requirements are not as strict as regular lending, we will still look at your credit scores and history.
- Income – we’d look for proof of income and that you could pay back the loan.
- Term – Any investor who’s going to put out money is going to want 12 months’ interest. So if they lend it out for 3 years and it is paid off 6 months later, they are going to want the other 6 months’ interest when the loan is paid off.
Equity or Down Payment
A private hard money loan is secured by the value of the collateral property. Typically, the biggest loan one can expect would be between 65% and 70% of the property value.
For example, if the property is worth $100,000, the lender will lend $65,000 to $70,000 against it the property.
This low loan to value (LTV) provides added security for the lender, in case the borrower does not pay, and they have to foreclose on the property. But, a private lender is not interested in taking back the property. He wants to earn interest on his money.
Money Street Mortgage in Clearwater offers hard money loans to people that need it, however, we have many other money loans for clients. Call today and talk with one of our hard money lenders.