The last few weeks I have been weighing the pro’s and cons of going with Hard Money Lenders vs Tradition Bank/Mortgage loan.
The only thing that is Pro for the Tradition vs HML is that there rates are more attractive.
Here is a quote from a Mortgage Broker:
Max 95% LTV w/ stated income/assets
80% loan is @ 6.99 fixed, Interest only for 10 yrs
15% loan is @ 10.99 fixed over 30 yrs.
I’ve been seeing on average for HML loans at about 15% with a considerable ammount of points 3-6.
However, Everything else seems to be in HML’s favor. Correct me if I’m wrong
HML pro’s:
Close faster- usually within 2 weeks, sometimes faster.
Don’t require a CO- Most Banks could approve you but it doesn’t necessarily mean they will approve the property.
Some HML’s loan rehab money as well. I found one that will loan 80% LTV after rehab value and 80% of repairs. Anyone find anything better then this?
HML’s approve a loan pretty much based on the project and how you present it, whereas Banks base it solely on credit and assets etc…
Seems like a no brainer to me or am I missing something?
And as far as the rates being better, what does it really matter? If you calculate your holding cost into a formula before you purchase and still get your required profit, then does it really matter how much you a paying for OMP?
If you are going to flip the property, HML can many times be better, despite the high cost. If you are holding the property, I would go with traditional lending.
Hello, Your right about the project being the basis over the credit. Something else that I would like to add about HML is that they may have higher rates and points but, they are taking most of the risk.
Another thing to factor in is that HML ask for upfront fees and cash available, equity in other property (or your personal home) or collateral to secure the loan.
My advice has always been, go with traditional first. If for some reason they cannot help you, use a HML as a last resort.
Hmmmm, I guess it wouldn’t hurt to try Traditional however the houses with the most potential profit are houses that can’t get a CO. And without a CO the bank will not approve the loan, right? Is there a way around this?
This weekend, I’m going to look at a house that has been boarded up for a while and needs a complete gut. I’d find it hard to believe that any bank would consider any property like this.
Hello, Usually a bank will not loan if it does not pass inspection. Watch for structural or fire damage. Also the foundation. Other than that, it’s up to the lender.