Quick Hard Money Loan Structure Explained

Source: https://www.reiclub.com/realestateblog/quick-hard-money-loan-structure-explained/

Hard money loans are not for everyone. They are the province of a chosen few – lenders, as well as borrowers. Just the word ‘quick’ eliminates traditional lenders who subscribe to the longer the better philosophy, preferring to finance a loan for the long-term since interest payments are their bread and butter. Once a loan is […]…

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Are you thinking of investing in property? But you don’t have enough money to do this. Right here is a tip you are able to use as long as the person selling the property is willing to negotiate along.

To be fair, not every seller will be interested (or even understand) the concept outlined. Your best wager is to find a property that the owner has great desire for offering it, whether because they are moving, a divorce settlement, or they are frustrated with the folks renting the property.

Actually, if you are currently renting and considering using this strategy perhaps the owner would be glad to help you out! There are several variations that could be used depending upon you and your seller. Do they desire the market price or are they just eager to get out of the monthly payments – maybe facing foreclosure?

The easiest way is to consider taking over their mortgage repayments – called ‘assuming’ the mortgage. You will have to be approved by the original lender to assume the mortgage. If you can’t get approved for an assumable mortgage you could also try a ‘subject to’ assumption where you merely make repayments while the property remains in the seller’s name.

You take over the first mortgage and get a 2nd mortgage on the remaining cost of the property with the seller. Offer a high, interest-only payment for a short time frame – two or 3 years. Instead of having the money stay in a bank they can be collecting a high interest over two or three years with the rest due in full at the end of the term.

When the term draws to a close you should be able to refinance the cost, or perhaps you can sell. Unless you strike a genuine bad market the value of the property should have risen in that time.

A lot of mortgage lenders merely want to make a great investment. While your local bank may still shy away there are a lot of financial lenders that would wish to make a deal. Financiers prefare real estate. The mortgage is usually around 60-70% of the value of the property, so as long as they understand they get their money back in the value of the land if you default, they do not care what sort of revenue you make. Conclude the deal with a 2nd mortgage created with the seller. In case you default they could still foreclose on the property and sell it, paying down the existing mortgage with the proceeds.

Now you can observe the complete picture. It is better that seller and buyer can work hand in hand. If they can’t wait for a sale, you can still give them their initial price with a little overall flexibility on their part.

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