Hard Money Loans

Typically, hard money loans are not usually offered by national chain loan companies and certainly not banks, but rather by private investors in a specific locale where the transaction actually is taking place. Hard money loans are lending agreements that use the parcel value of a piece of land as collateral for securing the agreement to lend currency. These type of lending agreements are similar to what is known as a bridge loan that lends money on property that is transitioning from category of zoning to another or from category of use to another. In both cases, these lending agreements have very high interest rates, and are based usually on a ratio of about sixty to seventy percent of the property's actual appraised value, although with the high volatility of the mortgages markets, sometimes the percentage can drop to as ,low as fifty percent. If a parcel of land is valued at two hundred thousand dollars, these two types of lending agreements would offer the borrower about one hundred twenty to one hundred forty thousand dollars of borrowed money or as low as one hundred thousand dollars. With this kind of loan to value ratio, the lending agreement protects the investor quite securely if a default on the lending agreement takes place.

Hard money loans and bridge lending agreements have had a volatile history, because during the 80's and 90's, investors often over valued land parcels in order to make high interest profits only to find the land never sold for anything close to the supposed value the investor envisioned. If a parcel property already has a mortgage on it, the lender of the hard money lending agreement will often agree to use other property owned by the borrower as collateral for the loan. Hard money loans are basically unregulated by state laws which make it sometime a fairly dicey kind of transaction, so much so that a few states have practically banned them altogether. But since these lending agreements are quite unregulated in the majority of states, the speeds at which the deals can be struck make them a favorite for borrowers seeking quick money. Scams have often taken place with local lending companies who take huge fees to investigate a parcel but never intended to actually loan the money while keeping the large fee.

Hard money loans will often have interest rates of fifteen to twenty five percent, and sometimes as much as thirty percent. In addition to these high interest rates, the lending agreements can also carry three to six points for the cost of formulating the agreement. On a two hundred thousand dollar parcel of land, six points would be twelve thousand dollars in origination fees, a very exorbitant amount. The lending agreements can often take place in as little as seven business days and sometimes can be formulated as interest only loans. "Judge not, that ye be not judged, for with what judgment ye judge, ye shall be judged: and with what measure ye mete, it shall be measured to you again." (Matthew 7:1, 2)

A real estate investor might be a prime candidate for one of the hard money loans offered by various lending companies. For instance, the investor finds what he/she believes to be a choice piece of land and wants to eventually build a community of home, so seeks out a lender who will give a loan for fifty to seventy percent of the appraised value of the real estate. The lending agreement may require that the real estate investor put up twenty percent of his/her own money while other lenders may be sought for the remaining value of the land. Online searches will reveal a number of companies willing to provide short term hard money loans. Short term would be defined as one to three years, but a number of the companies don't want to deal with lending agreement amount below a million dollars. 

Investors who provide hard money loans are local people who know intimately the value of certain land properties in his/her area and are willing to take a moderate amount of risk for a big profit. These lenders are sometimes hard to locate, but have been known to reach out to borrowers already in foreclosure, or to refinance a mortgage so that the borrower can take out large sums of money from the deal. It is a business which makes lending agreements to those who are in desperate straits. It's a business that is often the last resort for hard luck borrowers. It's a business that doesn't usually ask for a credit score, only for proof of the numbers involved in the deal.

Most everyone has been known to do some desperate things when facing a wall with nowhere to go and these last resort lending agreements are on that list of last ditch efforts. When the world is caving in and no one has answers and a person is left to his/her own devices, some really bizarre decision making can take place, and an awful lot of that bizarre behavior is self destructive. Like many animals seen at zoos, humans can pace and claw and jump and scream and try every way possible to escape a predicament. But the Christian life offers a much better way. Some people mistakenly believe that there is actually a bible verse that says God helps those who help themselves. Sorry, but that one does not exist. When faced with the wall and nowhere to turn, here are some words God offers his children: be still and wait; stop all the activity and all the noise and really let Him work out a solution; allow God to work like the loving heavenly Father He is.