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06 Mar 2017
Legal Moneylender Jurong West
Hard money lenders are simply another type of mortgage broker--or could they be? Well, it depends. Following are several ways in which hard money lenders are in fact very different from regular mortgage brokers--and what that may mean legitimate estate investors.

Legal Moneylender Jurong West
Private lenders vs. institutions

Regular mortgage brokers make use of a quantity of institutions for example big banks and mortgage companies to arrange mortgages, making their cash on points and certain loan fees. The financial institution itself tacks on more settlement costs and fees, so when the closing has ended, the borrower has paid anywhere from a few thousand to many thousand dollars in fees, points and other expenses. And the more mortgage brokers are involved, the more points the borrower pays.

Hard money lenders, however, work directly with private lenders, either individually or as a pool. When the hard money lender works with the non-public lenders individually, then for each new loan request, the hard money lender must approach each private lender until s/he has raised enough money to fund the borrowed funds. The cash is then put into escrow until the closing.

Alternatively, instead of approaching private lenders individually for each new loan, the hard money lender may place private money in the private lenders right into a pool--with specific criteria about how the money may be used. The hard money lender then uses predetermined terms to decide which new applications fit those criteria. The loan servicing company that collects the loan payments pays them into the pool, and also the pool pays a portion of those payments back to the private lenders.

Different types of properties--investment vs. owner-occupied

While regular lenders can work with residential properties or commercial properties, hard money lenders vastly prefer investment properties--also referred to as "non-owner-occupied" properties (NOO for brief). That is because "owner-occupied" (OO) properties have restrictions about how many points hard money lender can collect (ex. no more than 5 points), and the term must be at least Five years.

With NOO properties, hard money lenders can charge higher points and costs and offer loans for shorter terms, sometimes even twelve months or fewer. That can be a may seem risky and dear, the profit in one good "flip" transaction can easily make up for higher loan expenses.

Understanding of predatory lending laws

Owner-occupied (OO) real estate properties are subject to what are known as predatory lending laws--a set of laws made to protect consumers, especially the under-educated, minorities and also the poor--from unscrupulous and unfair lending practices.

Hard money lenders must be fully knowledgeable of both state and federal predatory lending laws. And private lenders will only use hard money lenders, just because a regular large financial company is frequently unfamiliar with predatory lending laws and may make a mistake that gets his license suspended--and may even jeopardize the private lender's loan.

Saving cash with hard money lenders

Now that we've discussed some of the differences between hard money lenders and traditional mortgage brokers, you can see some of the reasons for using hard money loans for investment properties that you plan to flip or rehab and resell. Here's another reason: by dealing with a hard money lender who has direct access to private lenders (instead of several layers of brokers), you may be saving yourself thousands of dollars in points and extra fees.

Furthermore, utilizing a hard money lender can help you quickly obtain the loan you need, using the term you want, and with no recourse for your personal credit. And when you can get the right kind of relationship with the right hard money lender and lenders, you too can be part of the "inner circle" of property investors just who learn about all the best deals first--and are building real wealth.


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