Navigating Hard Money Lender Ratios-Attleboro MA- Kensington Real Estate Brokerage

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Real Estate Agent with Sankey Real Estate

I have been recently studing with Hard Money Lenders, and have a complete understanding of the kind of property they are looking for. If you have the lender and are looking for the perfect property to fix and flip, I will find it for you! For those of you unfamiliar with hard money lenders or loans, let me define for you.

A Hard Money Loan is a loan in which real estate serves as the collateral asset. The hard money loan is usually from a private lender.


 A hard money loan is a specific type of asset-based loan financing in which a borrower receives funds secured by the value of a parcel of real estate. 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. Hard money is similar to a bridge loan which usually has similar criteria for lending as well as cost to the borrowers. The primary difference is that a bridge loan often refers to a commercial property or investment property that may be in transition and does not yet qualify for traditional financing, whereas hard money often refers to not only an asset-based with a high interest rate, but possibly a distressed financial situation, such as arrears on the existing mortgage, or where bankruptcy and foreclosure proceedings are occurring.


 Many hard money mortgages are made by private investors, generally in their local areas. Usually the credit score of the borrower is not important, as the loan is secured by the value of the collateral property. Typically, the maximum loan to value ratio is 65-70%. That is, if the property is worth $100,000, the lender would advance $65,000-70,000 against it. This low LTV provides added security for the lender, in case the borrower does not pay and they have to foreclose on the property.


 Loan Structure
A hard money loan is a species of real estate loan collateralized against the quick-sale value of the property for which the loan is made. Most lenders fund in the first lien position, meaning that in the event of a default, they are the first creditor to receive remuneration. Occasionally, a lender will subordinate to another first lien position loan; this loan is known as a mezzanine loan or second lien.
Hard money lenders structure loans based on a percentage of the quick-sale value of the subject property. This is called the loan-to-value or LTV ratio and typically hovers between 60-70% of the market value of the property. For the purpose of determining an LTV, the word "value" is defined as "today's purchase price." This is the amount a lender could reasonably expect to realize from the sale of the property in the event that the loan defaults and the property must be sold in a one- to four-month timeframe. This value differs from a market value appraisal, which assumes an arms-length transaction in which neither buyer nor seller is acting under duress.

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Tiffany Chapdelaine Wetherbee

Sankey Real Estate Brokerage, North Attleboro, MA

North Attleboro Realtor and Real Estate Concierge

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Tiffany Chapdelaine Wetherbee and Sankey Real Estate can help you find Homes in North Attleboro and North Attleboro homes for sale, Attleboro Real Estate & North Attleboro Real Estate, Houses in Attleboro & Attleboro Homes for Sale, North Attleboro Mass Real Estate, and Homes for Sale in North Attleboro Ma, Real Estate North Attleboro. And Houses for sale in Attleboro Ma.  We can also help you find Real Estate Values South of Boston like Foxboro properties, Norton homes for sale, Franklin homes for sale, Mansfield homes for sale, Mass Realtors & Realtors in Mass.

 

 

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Rainmaker
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Joyce Kelley
Charles Stallions Real Estate Services Inc - Gulf Breeze, FL
Buyers Agent 800-309-3414 Pace and Gulf Breeze,Fl.

We have a hard money lender here that our broker uses for investors. It is a vehicle for sure gotta be careful of what you are doing.

Aug 28, 2012 04:25 PM #1
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