Funny thing is that most people take that hard money loans and bridge loans to be the same thing. This is not the case; there is a very basic difference between these two. Not all bridge loans are hard money loans. Many investors make use of hard money loans for a wide number of things including bridge financing. The confusion mainly arises from the fact that the current bridge financing market is quite unhealthy which leads to a large number of investors opting to use hard money for their temporary financing needs.
Investors opt to use hard money bridge loans to satisfy their capital needs. For instance, you can want to buy a house and you stumble upon a greatly discounted house that is being foreclosed. You see that the deal is too good and you do not want to let it go. You want to buy the house so that you can rent it out but its condition is very bad and it needs a lot of renovation before you can be able to put it out in the market. No lender will be willing to advance you a long term loan to renovate the property due to the bad condition. A bridge loan will suffice at this point. In simple terms, a bridge loan helps you to survive between the time when you buy the house and when you will be able to get permanent financing to pay for the house. Investors used to approach banks to get bridge financing. However with the hard hit that the economy has been recently getting, many banks have opted to stop giving this type of financing and those that still do have put in place very tight limits.
With hard money loans on the hand, the money is sourced from private investors. The loans come with interest rates and origination fees that are a bit over the prevailing market rate. These rates though still lie between reasonable limits. Normally investors turn to them because they know that they can get this money quickly without having to go through a lot of scrutiny and they can pay it off quickly. The process that the private lenders will take the borrower through is much shorter and much faster compared to the one that the banks will take you through. This makes it easier for the investors to acquire the cash that they need for the current financing needs that they have. This is what has given rise to the hard money bridge loans.
Sometimes as an investor you may come across a property that requires quite a huge amount of money to purchase it but because of limited resources you forfeit that opportunity. What many investors especially the beginners are not aware of is that there are several financial institutions which provide short term hard money loans within a very short period of time. such kind of loans are usually preferable to huge investors such as real estate companies that often buy land and other property that they come across. The term hard is used simply because it is somehow hard to pay back.
These loans are normally provided by individuals or other small groups based on either your credit score or your collateral. The good thing is that you may have a low credit score but still qualify for the loan since what they usually look at is the size of your assets. If you are an investor and you are looking forward to increase your financing sources then these types of loans are best for you. However you should be aware of the risk involve before you get into it.
There are several pros and cons of short term hard money loans. Below are some of the advantages and disadvantages.
More options for collateral
The good thing about hard money lenders is that they accept many types of collateral unlike other financial institutions. You can even use your anticipated cash flow from the asset you want to buy or even your home as collateral. They can also lend you up to sentry five percent of the value of the property you want to buy. And just in case things don’t go your way and you are unable to meet the LTV ration then you are allowed to use assets such as your retirement benefits, house etc. as collateral.
These loans are very easy to get and most experienced investors use such loans to finance renovations and repairs since they can quickly close the transaction and then establish separate accounts with the financial institutions in order to pay for the renovations and repairs.
Higher risk and cost
One disadvantage of short term hard money loans is that they attract high interest rates and lenders always demand upfront fee. You also stand to lose your property used as collateral just in case things don’t work out.
In summary, short term hard money loans are a quick way of getting finances especially for the big investors such as real estate companies. However, it is important to understand the risk involved before applying for the loan.
How to get a commercial mortgage refi even with a poor credit score.
Countless times you have sat down on your favorite chair and thought about buying a new house. Your wife keeps complaining how the kitchen cabinets won’t fit all her cutlery that she wants, the oven is too small because she wants to bake. The next few words will tell you how to overcome this state.
Have a history. For most people with poor credit, you most probably made one deal that wrecked your financial flow or invested your money in the wrong pot. To get a commercial mortgage refi with poor credit, first and foremost you need a solid background. If you fall under this category, getting a financial donor to listen to your claim will help you move from where you are. In instances like this, the one thing you always need to remember is always state the truth on why something did not work out. For the bank to grant you your request, then you need to convince them, that you did not squander your money, it’s just that you had not insured your business which went down in a fire from the next store. All the financer needs is to trust you with their money with no reasonable doubt.
Commercial mortgage refi with poor credit is nightmare for everyone but you can always wake up on the right side of the bed. Sit down and look at where you flawed, create a list of what you did and where you went wrong vertically parallel to each other and on the third row create a solutions column. This is where you are going to list what you could have done different. If you did not insure your property, insure it this time round, if you loaned your brother in promise of getting it back in interest, invest it this time round. Then take the most probable solution that you have worked out and approach the financer with it.
The third and final step is actually waking up from your old broken one sided chair and going for it. The one thing that kills enough people and families is individuals who taught themselves how sit squarely on that one legged chair and not tumble on it. This means that you got comfortable when you fell and you have no reason whatsoever to come back because you went back to your mother’s house of your wife has a well-paying job. Commercial mortgage refi with poor credit is never a good place to be but since you are there now, why not do something about it in the first place?
That is how you use a bad state to overcome another.
Hard money commercial loans are known to give an alternative source of advance loan for commercial purposes for which mainstream funding is unavailable. Majority of the people who apply for these types of loans use them for intentions such as high-risk investments that require huge capital. Entrepreneurs utilize any opportunity they find in the market, but not once have they encountered financial restriction. Conventional banks limit their loans to particular levels, and that is the point that these hard money commercial loan lenders come in. Here is what you need to know:
The application process
Getting this type of loan has proved much simpler than the usual financial institutional loans. The lenders are a phone call away. What you need is to present your need with your credentials on the negotiation table. The lender’s interest is to evaluate your enterprise in terms of its ability to cover the loan. Their aim is usually to retain their capital and to get profits through the interest charged. The disbursement of the funds is quick as long as the agreement is reached.
The interest rates
The lender is aware that the loanee is engaging in a high risk business that few or none other financier can easily loan. He will therefore have the liberty to hike the interest rate as a monopoly in this field. This is however not meant to discourage the loane. The interest rate is also constant even if payment is done before the repayment period.
It is imperative to have collateral when or before applying for a hard money commercial loan. The lenders will hold onto that asset you provided as collateral to compensate for the loan in case loan repayment is declined.
Duration of loan
The loan period is always short –a rule of the thumb for these kinds of loans. The maximum duration of these loans will hardly exceed three years although they might vary with the lender. For new loanees, a short duration is assigned for the lender to assess your creditability status. Punctual repayment of the loan increases your loan limit as well as your credit worthiness.
The lender will be particularly keen on assessing your documented plans in the line of you sources of funds to successfully clear your loan. They often reference to Loan to value (LTV) that is how successful your enterprise is or how long you have been in business. The markers of such factors are such as favorable credit scores and preferable proceeds.
WHAT TO KNOW ABOUT SHORT TERM COMMERCIAL LOANS
Short term commercial loans are given, upon application by financial institutions to both small and blue chip corporate entities to finance its short term operations like expenditures. Also where there is an emergency on financial or a crisis that needs money as soon as possible to sort out the issue. These short term loans come in hand because they become a great solution in terms of finance to those corporate or organization who are faced with hindrances of covering expenses which emerge to be of urgency. Traditionally, debt financing only occurred with loans that would take a period of 5 years or more to be able to repay it back. However with these emergencies, the short term commercial loans have made it easier for business entities to finance their operations.
Short term commercial loans have strict terms before a financial lending institution approves your loan request. In some cases the lender request to look at the company’s books to ascertain it credit worthiness before granting the loan request. The time limits for short term loans are strict and may range from a few months to one year. The borrower stipulates what the intended purpose for requesting the loan and when it is likely to be financed with the specified interest rate.
Many reputable lending institutions provide these loans by physically going to the banking premises or by doing it online where one has a busy schedule upon filling the requisite forms. Advisably, it is important to visit the bank and talk to the guys at the credit section to find out the packages they have, the interest rate chargeable and the repayment period that works with the period that you are able to service the loan.
It is advisable for one who intends to seek a loan to know and fully understand the pros and cons of short term commercial loans before proceeding to apply because one big disadvantage of applying these loans is that they are much more expensive by reducing profit margins due to the high interest rates than long term commercial loans and if one is not careful enough they will end up worsening their financial situation and even will put one in the bad side of the lenders because maybe the borrower might have delayed paying up all the money plus interest as agreed hence defaulter as rarely do loan lenders desire to work with culprits of defaulting and even one can be put out of business.
Almost everyone is familiar with the word loan but not very many people understand the real meaning of hard money bridge loans. To understand this concept better, we need first of all to dissect the meaning of the word bridge. A bridge is something that links to different things or places together in some way. For example if a your route requires you to pass over a water body, the only option to get to the other side is by building a bridge. Similarly, in real life situation there are things that sometimes seem almost impossible to achieve but somehow somewhat away out is arrived. In simple terms, hard money bridge loans are loans that are availed to those individuals who are in need of large sums of money within a short period of time in order to purchase property such as a home.
In normal circumstances, it might be a little bit difficult apply for hundred thousands of dollars and get it approved for example within a week. Assuming you have seen this nice home that you have been dreaming and you really want to buy yet you don’t have the cash at that moment. The probable thing you would do is to immediately sell your current home and use the money to purchase the new house. But easy do you thing that is? This is now where hard money bridge loans come in handy. Even if you were to apply for a normal loan in a bank, it will definitely take you at least 3 months before you get the money. This is because borrowing such huge amounts of money requires that you sign several documents.
That is why hard money bridge loans remain the only option for you to secure that property before another buyer gets on your way. The advantage of such kind of loans is that there is less paper work and you are assured of getting the cash within few days. The only thing you need to do is to ensure that you have a proper exit plan so that you can repay the loan as quickly as possible. You should also ensure that your equity position is healthy which implies that the loan you are applying for is tandem with the collateral you have provided.
In general, bridge loans always help people to achieve that which seem impossible. You can easily get whatever amount you want and purchase your property before it is bought by someone else. However, to reduce the interest rate you need to speed up the process of disposing your existing house.
What to Know About Bad Credit Commercial Mortgage Refinance
Credit is itself bad enough and finding yourself in one of these situations can be quite embarrassing. Over the last few years and because of recession a lot of families and business had had to contend with issues of bad credit commercial mortgage refinance. Where do you go to when already you are in the red and who will be able to listen to you. One thing you need to know that bad credit is not an end to life. There are lenders who will take their time and listen to your story however terrible it seems. Just dust yourself up and start from somewhere.
There are simpler and better ways to go about it. Firstly, approach different lenders, not all will deny you credit because of your bad record. Be very sincere and state yourself out on why you need the money and how you intend to pay it back. If for one reason or another, they are not willing to give you another chance, check with the next. Most lenders have been in the market long enough and would be willing to give you another chance as long as you are able to create a working business plan. You must also be ready to pay higher interest rates.
Remember borrowing from relatives and friends is not a solution when you are looking for a solution to repair an already bad credit record. That is simply a no way to go. Relatives will talk behind your back and come for their money when you are least prepared to repair. Opt for a financer that will understand your situation and be willing to help you out. Bad credit commercial mortgage refinance companies are not interested in your emotional situation. Keep that out of the business. If a lender is kind enough to listen to your story simply give them the facts.
Not all will be able to give you a chance with such a record. Simply this is not the time to despair. If you find one that is ready to listen, you are ready to go. Don’t waste that chance as you might not be able to find such again. Widen your scope from banks to SBAs when looking around. Everybody once in a while has found themselves in your situation and that should not create a big problem. We have set many people back to their feet when they though all was lost by listening to their story and simply helping them obtain bad credit commercial mortgage refinance. Don’t allow your house to be mortgaged when you can find ready help.
Information on Hard Money Commercial Bridge Loans
Hard money commercial bridge loans are designed to offer businesses the financing they need until they are able to acquire long term financing. The US Funding Solutions offers hard money bridge loans which are available in different programs. They represent various private lenders. These lenders specialize in hard money lending for the purpose of acquisition of commercial property and refinancing. Properties offered loans include multi-family properties, mixed use properties, offices, warehouses, industrial properties, retail properties, hospitality and special use properties. These loans are the perfect solution to keep the business going before secure long term funding comes along.
The hard money commercial bridge loans through US Funding Solutions are offered up to $15 million with down payments that are as low as 15%. The loan term varies between one to five years and the loan to value ratio is up to about 75%. They offer the loans throughout the US thus are not limited to various regions.
The interest rates depend on the type of loan, the risk profile of the investment and the structure. They vary between 8% and 14%. The hard money bridge loan programs offer a payment method of either interest only or principal amortization and a DSCR minimum of 1.2. Early repayment is allowed but it is reviewed on a case to case basis and to be determined by the lenders.
Security needed is the first mortgage lien and additional collateral repayment is determined on a case to case basis after assessment of the circumstances. This makes it easy to be able to qualify for the loan as only the first mortgage lien is required. There are various deposits expenses to be made together with the initial deposit made in the first payments. These are the third party expense deposits for the acceptance of term sheet, the closing expense deposit for the acceptance of closing letter and the unused expense deposits which is refundable.
There are no charges for the initial underwriting thereby reducing the overall charges for the one taking the loan. The US Funding Solutions is a reliable source of hard money bridge loans. The qualifications vary depending on the specifications given by the private lenders. The loans are secured in real estate and the lenders use the equity in real estate for their business. The private lenders are a good option for a business stuck without finance as they get an opportunity to continue with business.