California Hard Money Loans
In California, privately funded temporary financing is commonly referred to as “hard money” . These loans are not designed to be long term mortgages. The cost of California hard money loans is very expensive, and they need to be paid off quickly, as soon as your investment property is completed or flipped. Interest rates on hard money financing is typically between ten and eighteen percent, and there is also usually from 2 and 5 loan points required up front. This means, you will automatically be paying the hard money lender 2 to 5% of your loan amount back, regardless of how long you have the hard money loan for.
Purchasing real estate with no money down is hard to do, but it is possible with hard money, if the value of the property is worth more than what you are borrowing.
When should hard money loans be used ?
Hard money loans are beneficial for short term real estate investments . They usually are only given if the property is worth at least 20% more than the amount financed . If a property is going to be kept for an extended period of time the Hard Money financing should only be used as a bridge loan, to bridge the gap until traditional financing can be obtained.
At rare times, hard money can be used by homeowners in distress who need to do something to prevent foreclosure. Because hard money lenders grand loans based on the value of the property, and not on the credit of the borrower, they will lend to people with poor, or bad credit, if the property has significant equity. Hard money loans for default borrowers is usually just a band-aid for a more serious financial problem . Private hard money lenders will generally initiate foreclosure with very little mercy .
What criteria should you look for when selecting California hard money lenders?
When choosing a hard money lender in California, you need to consider the time it is going to take to obtain the loan , the points required to get the loan, the interest rate, and repayment terms. You should also take into consideration how liquid the cash will be, how long it will take to get the cash when you find a great deal . If the hard money lender takes too long to get the money to you, you’re probably better off getting traditional financing, and will miss out on the opportunity to purchase a deal at the trustee sale good bye.