he current economy makes it difficult even for investors to find financing for their properties. Many lenders are tightening their lending regulations and leaving many investors without financing, especially those that do not qualify for the best rates because of credit risk factors or property that is deficient in some way (i.e. in need of renovations, priced higher than market value, etc.). This leaves those investors looking for other mean of financing such as through hard money lenders in NY.
What Is a Hard Money Loan/Lender?
Hard money lenders have been around for many years. In most cases they focus on helping investors with real estate transactions in the area where they reside or conduct business. Hard money lenders are in a position to supply funds to help investors purchase property that is not of interest to traditional banks and mortgage companies for any number of reasons including the credit risk involved with a particular investor or the value of the property in question.
Why Use a Hard Money Lender?
Sometimes an investor may turn to a hard money lender in New York because he needs to obtain funds quickly in order to receive a good price on an investment property. In today’s economy traditional banks may take too long to make a decision and possibly cost the investor the deal. In this situation the buyer is aware he has to make a quick move and will seize all opportunities to obtain the cash he needs as quickly as possible.
There are several situations like those listed above that will induce investors to search for local investors who are in the business of putting together short-term lending packages. If the investors feel the investment is right for them they will quite often supply the funding the buyer needs.
Another situation that might interest a hard money lender in New York is a property that is selling below market value and requires renovations in order to make it usable. The investors will meet and determine the true value of the property before deciding on the amount they are wiling to fund for the project. Investors will walk away from any deal if they are unable to reach an amicable agreement over funding.
Hard Money Lenders vs. Commercial Lenders
One thing to keep in mind if you are considering seeking out a hard money lender in New York is you will not receive the same terms as you might expect from a commercial bank. In addition, you will pay a higher interest rate. These loans are designed to provide short-term funding, usually one to six years with interest rates than vary between 10-15 percent. One of the good things is these lenders are unconcerned with the buyer’s credit rating and lend based on the value of the property. Since they typically only lender 60-70 percent of the value, they still have an opportunity to make a profit if they have to sell the property to recover their investment.