Money Lending

Added: September 27, 2006

Hard Money Lenders are Companies, which offer specific real estate backed loan. They provide bridge loans (short term loans) that offer value based funding of the real estate, collateralized for the loan. Hard moneylenders usually charge higher interest rates than banks (between 11-16%) as they fund even those deals not conforming to bank standards.

Hard moneylenders may cater to local market or even offer loans nationwide! Some brokers work as hard moneylenders by taking a percentage of the loan (called points) in exchange for preparing & submitting the loan documentation (and finding a direct lender). Several hard moneylenders deal directly with the applicants. Some hard moneylenders charge application fees while others charge fees only at the time of closing. Some may impose prepayment penalties while few may focus on investment properties & few others may finance owner occupied property as well.

Several directories offer links to numerous hard moneylenders for brokers or borrowers seeking a lender.

REGULATION:
Several States’ Usury Laws (e.g. Tennessee & New Jersey) check hard moneylenders from operating with their standard practices. Regulation of Hard money varies according to the State, status of the borrower (that is whether the loan is made to a business or to a consumer). Consumers are usually provided with extra security by the states. They have more lending oversight & regulation remunerations federally when the loan is issued by a Commercial bank (Federally Chartered by the OTC). Commercial Hard Moneylenders issue some of the most competitive loan terms.

Commercial hard money is either issued to a business unit or to an individual signing on behalf of a corporation. It is secured against a commercial property or a residential investment property. It can be secured against residence juxtaposition with a business property as a means of obtaining extra guarantee for the lender. This kind of additional security is called blanket mortgage.

Following are the sources of the asset based commercial hard money loans:


  1. Private Individuals

  2. Mortgage Companies

  3. Federal Banks

  4. SBA Lenders


They have varying degrees of profits & downfalls in terms of choosing a commercial hard money loan lender. For instance a private individual may offer unique terms but may be reluctant to offer a workout plan thereby the loan becoming delinquent. A Federal Bank may offer aggressive loan rate in comparison to an individual but may demand a high pre-payment penalty fee costing the borrower dearly if he wishes to sell or refinance the loan within 1-5 years.