Every type of loan has a different type of structure.
Structure means who is paid what, how the loan will be paid, the interest rates, who is involved, and what is at stake.
With all hard money loan structures, real estate is always used as collateral with every loan. This is one main factor that makes it a hard money loan.
Almost all lenders who take part in hard money loans lend in the 1st-lien position. This means that if the borrowers cannot repay this loan in the designated time, this lender is the first person to get paid off.
Any lender would rarely lend at a lower position than 1st-lien as these borrowers are already marked as high risk, so the odds are clear that they may be unable to repay this loan.
Hard money lenders structure their loans based on the percentage of the quick sale of their valued property. This is known as Loan-To-Value, which usually hovers around 60%-70% of the property value.
When the lender tries to determine the property’s value, the ”price of today” is always referred to. This makes the process that much easier for the lender.
Be aware that with every different lender comes a different structure. This is the great part of hard money lending.
Any lender can charge or lend whatever they see fit.
This is why hard money lending is generally a last resort for most people; they have no choice but to accept the interest rates and collateral the lender expects.
Suppose you are looking to take out a hard money loan. In that case, whether it be from a private lender or a commercial lender, it is important that you know the basic structure outline in case you find yourself being taken advantage of more than the average hard money borrower.
With the variance in loan structures, you can never be sure exactly what you will be charged, but at least if you know the general information and outline, you know what to expect and when you are being taken advantage of.
Before you sign off on any type of loan, including these, ensure you know what it offers you.
Ensure that you know what the value is to you as well.
Ask questions and get the answers you need to find yourself in a better place overall.
A hard money loan may be just what you need, but take the time to understand it first.
We have been Serving the Dallas-Fort Worth Real Estate Market
& Investors with hard money loans for years!
DFW Hard Money is a lender offering real estate hard money loans in Fort Worth, Dallas, and the DFW Metroplex.
We strive to make the process quick and easy for all parties to the transaction and offer competitive rates in the current hard money lending marketplace.
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