#hard money loans
The truth about hard-money loans
Q: What is a “hard money” loan?
Hard-money lenders do not rely on the creditworthiness of the borrower. Instead, they look to the value of the property. The lender wants to make sure that if the borrower defaults, there will be sufficient equity in the property over and above the amount of the loan. Accordingly, you will not get a hard-money loan of 80 or 90 percent loan to value; typically, they will range from 50 to 70 percent loan to value.
Such loans are considered loans of last resort. If you are unable to get a conventional loan from a bank or mortgage broker, you may be forced to negotiate with a hard-money lender, who often are private individuals lending money from pension plans.
And beware: Those loans are more expensive and often have more onerous terms than the standard mortgage backed by the federal government, Fannie Mae or Freddie Mac.
Who typically gets such a loan? If you have bought a house and haven’t yet sold your existing one, you might get a hard-money bridge loan. They are typically short-term. Other users are homeowners with bad credit but lots of equity in the home who want to avoid foreclosure. Unfortunately, from my experience, all too often the hard-money lender ends up owning the property.
There are many legitimate hard-money lenders. However, as in every profession or industry, there are some bad apples. Some hard-money lenders are loan sharks whose sole objective is to take your house away from you.
If you need a short-term loan and decide to confront a hard-money lender, have your attorney review all of the legal documents the lender will ask you to sign. You want the money, but you don’t want to lose your valuable home.
Q: We have a time share that we want to deed back to the resort, but they want $1,750 to take back the deed. We are in our 70s and want to know if we can just give the deed back without paying the fee.
Can they put a lien on our house? We don’t care about credit ratings, since we pay cash for everything.
A: You cannot just “give away” the deed. It has to be accepted by the resort and recorded among the land records in the county where the property is located.
If the resort will take back the deed and relieve you from any and all further obligations, I would jump at that opportunity. Obviously, I would try to negotiate a lower buyout or try to work out a payment schedule. However, from the many readers who have time-share problems, your situation is unusual.
I do want to comment about your statement that you don’t care about your credit rating. You may pay everything in cash and be a multimillionaire, but there may come a time when you will need credit, and a poor credit rating can, and will, haunt you for the rest of your life.