As we all know from reading the newspapers and listening to the news, conventional banks are not lending. They are certainly not lending to marginal borrowers and loans are not the most pristine borrowers.
This has created a great opportunity for those who have the ability to grant loans, whether mortgage banks or individuals with funds. Bridge loan money. As noted above, the bridge loan is a fantastic. The hard money bridge loans & bridge loans are being used by most of the persons in the market, you must read this full guide on hard money or bridge loans.
The types of businesses that have typically gone for bridge money have involved borrowers who may not have had great credit, or agreements requiring more work before a traditional bank would get involved. That’s not the case now!
Today, there are many great deals with great borrowers need to follow this path because traditional sources have dried up .
It is not found at the chance!
What Is Bridge Money (aka Hard Money)?
As its name suggests, bridge loans are made to an owner, a builder, an investor or a borrower who needs money for a non – real estate with late part of the process to the next. This type of loan, as mentioned above, has always filled a certain niche in the mortgage lending market
An example would be the owner of a commercial property or residential property that has to do some type of rehab work before the property is ready to be occupied or sold. The property as they are, would not be eligible for a traditional loan, but once rehabilitated it would.
How Is The Money Lender Protected or Guarded Bridge?
If you lend bridge money, you will be secured by a mortgage first put up on the property they are paying him. In addition, if the borrower has other property with substantial equity, you can demand that you get a mortgage first or second in it to provide additional guarantees.
One of the keys of bridge loans is that the loan amount will only be 50% -60% of the quick sale value of the property. This is determined by an appraisal is done before any loan amount being discussed. A quick sale is not the amount of assessment, but fewer than receive goods sold in 90 days for a loan once had to be foreclosures. To know more about how to avoid commercial foreclosures for the latest information.
For Example, A Borrower Has A Property That Needs To Borrow Against.
- An assessment is done and returns to $ 1,000,000.
- 50% -60% LTV (loan to value) would mean a loan amount of $ 500,000 to $ 600,000. , Acuerdoo do? Do not!
- Would you cut the $ 1,000,000 appraised value to a number that would have to sell the property within 90 days.
- In other words, it would be somewhere in the neighborhood of $ 700,000. 50% -60% LTV, this means that you would offer the borrower $ 350,000 – $ 420,000.
- As a bridge loan lender, you need to feel comfortable with your warranty!
What Is The Rate?
The current price of bridging loans money is not an exact science. Typically, the higher the risk, the higher the rate will be charged. In today ‘s environment, irrespective of the fact that global interest rates are down, bridge loans will be in the 12% -15% range.
If there is enough equity in the property, often the first years interest expense can be included in the loan.
While these types of loans may not be appropriate for everyone, for an investor who understands the process and the risks that are involved, it’s a great opportunity.