Commercial hard money loans are much like the other forms of hard money loans. A typical hard money loan is an asset-based financing by which the person who is borrowing the money gets it against the value of some self-owned commercial or non-owner occupied property. This could be in the form of commercial or investment property. The loan is non-conventional and is rarely given by commercial banks or any deposit organization. Instead, only those venture into giving hard money loans which have large reserve of money and can take the risk. It has a history of over five decades. A hard money loan carries a higher risk factor and therefore a higher interest rate as compared to conventional property loan, making it more expensive.
Commercial hard money loans may not enjoy the same consumer loan security as residential loans. Moreover, they are generally over a short term and often referred to either as bridge loans or bridge financing. The chief difference between hard money loans and bridge loans is that in the case of the former a note of misfortune creeps in, like concern for deteriorating financial condition, mounting arrears, bankruptcy, foreclosure or a whole lot of other reasons.
While applying for commercial hard money loans the borrower’s credit score is not taken into account. Private investors are the people who provide quick hard money loans within their own locality. Such loans can be got through the value of the guaranteed assets. Commonly it has been observed that the largest collateral amount that one can expect is between 65% and 70% of the total value of property mortgaged. This is a further shield the money lender uses to play safe and refrain from foreclose on the mortgaged assets. The higher the possibility of default, the higher is the rate of interest. If the borrower fails to pay back in time, the commercial hard money loans allow the lender can seize the property as his own.
Thus, the property mortgaged becomes the source of repayment. It is advisable to seek long term loans, but those that extend over a year are most common. It is easy to clinch a deal easily and quickly. Also, the exit fee and prepayment fine has to be cautiously looked into prior to settling the transaction. .