Equipment Leasing

Introduction

Hard Money is a term that is used almost exclusively in the United States and Canada where these types of loans are most common. Hard Money is more expensive than traditional lending, but it is not the "cost" of the money that is important, it is the "availability" and the "timing" of the funds that makes or breaks the deal for the Real Estate Investor. This type of money is only for short term financing, good for those who need to get funds fast to do a deal.

Private

Private money rates generally range from 10 to 15%. Private Money refers to funds that are loaned by non-institutional or private investors, as opposed to heavily regulated banks. Private Money is used when a) quick funding is needed; b) bridge funding is needed; c) bank funds are not available to the borrower. Private Money loans are more expensive than bank loans. The loan being taken is not intended to be long-term. Private money, however, is typically funded within two weeks, and can be funded as quickly as 24 hours in certain cases. Private equity lenders typically start at an interest rate of 12 percent and they make loans only when the borrower has at least 30 percent equity in the property. Private investors are people who have the liquid cash, but don't have the desire to actually do the work themselves.

Lender

Lender fees are also more expensive than those involved with conventional mortgages. Lenders actually require low LTV's of 65 percent or less. Lenders are ramping up their operations to better provide online loan sourcing directly to borrowers. Lender points range from 3-7 pts...and much higher for speculative international development deals.

Borrower

Borrowers in these positions may have large equity positions from, an inheritance, years of accumulated mortgage payments or a former homes sale. Borrowers who are facing a foreclosure may also try to obtain a hard money loan as their last option to stop foreclosure. Borrowers have to meet certain credit standards. Borrowers are advised not to work with hard money lenders who require exorbitant upfront fees prior to funding in order to reduce this risk.

Broker

Broker an individual or firm who acts as an intermediary between a buyer and seller, usually charging a commission. Broker points generally range between 2-3 pts. Brokers can provide invaluable assistance in identifying specialized lenders that you couldn't find on your own.

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