What Exactly Is a Hard-Money Loan, Anyway?
Tuesday, June 13, 2006
It’s simple, actually. Hard-money loans are mortgage loans that are offered by private individuals or companies rather than financial institutions, such as banks or credit unions. These entities are known as "hard-money lenders." Borrowers who either do not qualify for mortgages through financial institutions, or who do not want to put up with possibly lengthy waits for loans to close, often go to hard-money lenders. These borrowers can sometimes have bad credit, insufficient income, or other factors that are considered undesirable to financial institutions. Property conditions may play a role as well, in why financial institutions categorize these borrowers as high risk. But other times, borrowers simply don’t wish to become embroiled in the seemingly never-ending red tape that traditional lending institutions require. A hard-money loan may also be an attractive choice for borrowers who are behind on their mortgage payments, or in danger of foreclosure.
With a hard-money loan, a private individual (or individuals) acts as the lender and extends a loan to the borrower. The hard-money lender can be a person, a trust, a real estate investment group, or any other private group. Certain companies, the likes of which include Kennedy Funding, are composed of partners, legal practitioners, and other support staff that specialize in fast, hard money bridge loans, and can offer borrowers surprisingly speedy loans from between $1 million and $100 or more.
Because the private lender is taking on this risk, the lender may charge higher interest rates than traditional mortgages obtained through financial institutions. The interest can be higher than loans available through banks and other, more traditional mortgage lenders. This is simply because these borrowers are considered much higher-risk candidates. But buying a hard-money home loan can be a great option for someone whose other financing options are not as stellar as some. And even while paying higher interest rates, many borrowers feel that the extra speed in closing, the virtually non-existent red tape, and other value-added services offered by companies on the level of Kennedy Funding far outweigh the extra interest.
Despite higher interest rates, there are definite advantages to a hard-money loan. The borrower can negotiate the interest rate and other terms and conditions more easily with the private hard-money lender than with a financial institution. The borrower also saves money on title insurance premiums and attorney's fees -- charges often applied by financial institutions. Because borrowers don't have to wait for mortgage approvals from financial institutions, the closing period is also considerably shorter. In point of fact, Kennedy Funding and other leading private lenders have successfully closed deals in less than one week, and their normal time frame is a fast 10 business days – far quicker than traditional lending institutions that can take weeks or months to close on the identical loan.
In short, Kennedy Funding and comparable private hard money lenders offer a viable solution to borrowers, and brokers, seeking a more attractive venue than a bank or other conservative organization.
With a hard-money loan, a private individual (or individuals) acts as the lender and extends a loan to the borrower. The hard-money lender can be a person, a trust, a real estate investment group, or any other private group. Certain companies, the likes of which include Kennedy Funding, are composed of partners, legal practitioners, and other support staff that specialize in fast, hard money bridge loans, and can offer borrowers surprisingly speedy loans from between $1 million and $100 or more.
Because the private lender is taking on this risk, the lender may charge higher interest rates than traditional mortgages obtained through financial institutions. The interest can be higher than loans available through banks and other, more traditional mortgage lenders. This is simply because these borrowers are considered much higher-risk candidates. But buying a hard-money home loan can be a great option for someone whose other financing options are not as stellar as some. And even while paying higher interest rates, many borrowers feel that the extra speed in closing, the virtually non-existent red tape, and other value-added services offered by companies on the level of Kennedy Funding far outweigh the extra interest.
Despite higher interest rates, there are definite advantages to a hard-money loan. The borrower can negotiate the interest rate and other terms and conditions more easily with the private hard-money lender than with a financial institution. The borrower also saves money on title insurance premiums and attorney's fees -- charges often applied by financial institutions. Because borrowers don't have to wait for mortgage approvals from financial institutions, the closing period is also considerably shorter. In point of fact, Kennedy Funding and other leading private lenders have successfully closed deals in less than one week, and their normal time frame is a fast 10 business days – far quicker than traditional lending institutions that can take weeks or months to close on the identical loan.
In short, Kennedy Funding and comparable private hard money lenders offer a viable solution to borrowers, and brokers, seeking a more attractive venue than a bank or other conservative organization.
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