Monthly Archives: January 2017

Hard Money Home Equity Loans: Understanding Bad Credit Loan Consolidation

Hard money equity loans in the prevailing market are loans at a premium mortgage rate to the borrower in exchange for a “no red tape” 2nd mortgage loan. The money may be used by the lendee for whatever purpose they chose so long as the equity in the property or collateral provided is sufficient to cover the loan.

The term hard money loan initially meant a loan for hard cash. Today the term has been enhanced to cover loans for non-conventional loans such as investments, private funded loans, home equity loans and equity line of credit loans. Now it is possible to refinance your primary mortgage to get cash, consolidate debt and purchase investment properties instead of a taking out a purchase loan as a non-owner occupied investment property.

A maximum loan on property owned by the borrower is called a cash out loan. The borrower has a loan to value, which means the loan on the property, or collateral used is equal to the value of the property or collateral used to secure the loan. This type of loan has a higher interest rate than the “A paper” home equity loan that has a fixed rate around prime.

A home equity loan is one type of loan available for a hard money cash out loan. The Payment option negative ARM is another good 1st mortgage for investment properties if the borrower is looking for a short-term loan or if being self-employed has created some cash flow concerns.

A negative ARM mortgage calls for the payment of interest only on the loan. If the interest for a period is not paid in full the balance is added to the mortgage. The end result is an increased mortgage balance and a loss of equity in the property used for collateral. As the mortgage balance increases, the interest on the mortgage loan increases even though the interest rate remains the same. If both the loan balance and the interest rate increase, the property owner may be forced to sell or the loan may be foreclosed.

A home equity lender may require all or some of the following items before making a hard money loan.

1. A clear precise description of the property

2. Home Title to collateral

3. Borrower must show expertise in the field the loan will be used in

4. Mortgagor must accept all lender terms unconditionally

Because the interest rates are higher, and state laws may vary, borrowers should examine all ramifications before considering hard money loans.

How To Choose A Good Investment Property Loan

Real estate investment is generally viewed as a lucrative career opportunity. But purchasing investment property does require a significant financial backing. Nowadays, however, the funds required to embark on a real estate investment career are easily accessible to many people in the form of an investment property loan. Therefore, you may begin investing in real estate, even if you are on a shoe string budget.

Investment property loans can be broadly classified into two categories, namely residential and commercial. Residential loan is associated with those investment properties whose predominant use is residential, and that are purchased for future appreciation and rental income. On the other hand, commercial loan is acquired for the purchase of apartment buildings (with 5 or more units), warehouses, or stores.

An investment property loan can be obtained from several sources, including banks, financial institutions, credit unions, and private brokers. These lending institutions analyze a borrower’s credit score, income and assets, in order to determine if he/she is a viable candidate for an investment property loan.

A multitude of real estate investors in the US make use of an investment property loan to acquire real estate. Doing so offers them a twofold advantage – they can enjoy the benefits of capital growth and tax deductions. Though the escalations are not anywhere near the boom of the late 1980s, property value does appreciate on a gradual basis (capital growth). Another significant benefit is that offered by “negative gearing”.

Gearing, in essence, refers to borrowing in order to invest. A negatively geared investment property is one that is purchased using borrowed funds and where the income (after expense deduction) from that investment is less than the payable interest in the course of a year. This allows a significant tax benefit for investors, as they may deduct the expense of owning an investment property (especially the interest on the investment property loan) from their taxable income.

Investment property loans come in various shapes and sizes, as per the requirements of investors. They are offered as interim, short term or long term loans. Needless to say, you must ensure that you are well aware of the terms of the loan, such as the interest rate, the time period of the loan, and the payment schedule.

In a gist, newbie investors need not have plethoric amounts of money to set out on a career in real estate, since property investment loans offer a great opportunity for them to get their feet wet in real estate.