The Home Buyer's Korner

Information presented should be used for educational purposes only.

June 6th, 2015

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GREATER WAIANAE HAWAII

The Home Buyer’s Korner

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Hard Money & Bridge Lenders

download (1)When looking for a hard money or a bridge lender, time is more often than not of the essence. If you’re looking for a financial partner in a real estate investment, you’ve probably began your search with traditional lending institutions and found the fast solutions you needed simply weren’t available.

Hard Money or Bridge Lenders enable you to acquire the capital you need to move forward on fast moving opportunities. The right hard money lender or bridge lender can be an advocate for success, but the wrong one can leave you mired in red tape and impair your ability to react with speed to changing financial circumstances.

With the above in mind, here are a few important things to look for when considering a hard money lender or bridge lender.

Availability

When you’re relying on a third party to assist you in your financial plans, it’s extremely important that they’re easily accessible. If circumstances change or challenges arise, you need to feel secure in knowing you’ll be able to get the answers you need to be a sound decision.

History of Delivering on Promises

You wouldn’t invest in a business that doesn’t have a track record of success; hence, the same can be said when it comes to looking for a hard money or bridge lender. Your financial goals should be the lender’s priority. It’s critical you look for a firm with a long history of success and a proven list of satisfied clients.

Service Focus

A sound hard money lender or bridge lender can be your ticket to success. Your investments are more than simply numbers on a page. Make sure your hard money or bridge lender is serious in helping you succeed and can assure that their focus is solely on ensuring your needs are met. Working with hard money lenders can often provide many benefits over working with a bank, but find one with years of experience and a long list of satisfied clients. If you do you’ll likely to accomplish all of your financial objectives.

What is a Hard Money or Bridge Lender?

A hard money or bridge lender is an investor who makes loans secured by real estate. They typically charging higher rates than banks, but also making loans that banks would not make and funding more quickly than banks, while requiring less documentation than banks.

Why do hard money lenders exist?

Hard money lenders exist because many real estate investors need a quick response and quick funding to secure a deal when looking for a real estate loan. Banks and other institutional lenders that offer the lowest interest rates don’t provide the same combination of speed and transparency in their decision making process, along with quick access to capital.

When does it make sense for a developer to use a hard money loan?

Investors/developers with strong financial statements and access to bank credit frequently choose to use private money loans (also called “hard money or bridge loans”). Situations where private money loans make the most sense include those where the borrower:

  1. Requires a quick closing and banks cannot meet the deadline;
  2. Has more good opportunities than cash;
  3. Wants to avoid spending too much time raising equity or debt from many different smaller investors, but prefers to instead focus on finding new opportunities;
  4. Lacks the time gather the necessary documentation of securing a loan from a bank;
  5. Has an excellent investment opportunity, but does not have sufficient financial strength to get a bank loan, and/or;
  6. Has a bank line of credit but needs a larger loan than is allowed under the existing bank line.

The common theme is that there is an opportunity for the borrower to generate substantial profit (or savings) quickly, and the cost of interest and origination fees is small relative to the anticipated profit, even given the higher interest rates charged by private lenders versus banks.

Are hard money loans used mainly when the borrower is in distress?

Some hard money lenders do focus on distressed situations such as when the borrower has another loan in default and needs to refinance. This is particularly true for commercial bridge loans.

In the single family residential arena, most hard money lenders shy away from distressed borrowers who are owner-occupants. Lenders are not eager to foreclose on a borrower living in his or her own house. Furthermore, regulations make this type of foreclosure much more time consuming and difficult as compared to an investor-owned property.

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HAWAII HOME OWNERSHIP TOOLS

Your Home Purchasing or Refinancing & Renovation Tools,

Home Improvements, Home Renovations,

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase.

Here are just a few of the home improvements

you might consider with any Home Renovation loan

Repair or replace a roof

Install, replace or repair gutters and downspouts

Replace, repair or upgrade your HVAC system

Repair or replace plumbing

Install, repair or replace electrical systems

Kitchen remodeling (including the purchase and installation of appliances)

Bathroom remodeling, Full interior painting, Total exterior painting

Repair or replace a septic system and/or well

Disability access (wheelchair ramp, elevator, widen doorways)

Build, repair or replace deck, patio or porch

Basement waterproofing and finishing

Abatement/Stabilization of lead-based paint hazards

Replace old windows, Room additions, Finish an attic

Add a second story to your home

Replace a termite damaged sill plate (a water-damaged sill plate also)

Possible landscaping items such as correction of grading & drainage problems,

tree removal, repair a driveway and sidewalks

FHA 203K

Your Home Purchasing or Refinancing & Renovation Tool

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase

FANNIE MAE HOMESTYLE

The Conventional Alternative to FHA 203K

Great for Real Estate Investors and Second Home Renovations

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase

USDA RURAL DEVELOPMENT

Up to $10K for Home Improvements, Renovations or a Simple Remodel

Mortgage Loan Officers, Real Estate Agents & General Contractors are ready to assist you

A SIMPLE HOME SHOPPING INSPECTION TOOL

Organizing your home shopping experience affords a wise decision-making process.

This simple home inspection tool makes your ultimate buying decision a smart one.

To print this document click on “Open in New Window” located at the lower right corner;

click on “File”; then click on “Print”. In the center of the screen you will

have the option to “Create A Printable PDF of the Presentation”.

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