So named “Hard Money Lenders” are what are also referred to as predatory lenders. This implies they make loans based on the premise that the terms to the borrower must be such that they will gladly foreclose if needed. Conventional lenders (banks) try everything they can do to avoid taking back a home in foreclosure so they are the true opposite of Moneylenders Act Singapore.
In the good old days before 2000, hard money lenders basically loaned on the After Repaired Value (ARV) of any property and also the percentage they loaned was 60% to 65%. Sometimes this percentage was as high as 75% in active (hot) markets. There wasn’t a lot of risk as the real estate market was booming and cash was very easy to borrow from banks to finance end-buyers.
If the easy times slowed and then stopped, the difficult money lenders got caught in a vice of rapidly declining home values and investors who borrowed the money but had no equity (money) of their very own within the deal.
These rehabbing investors simply walked away and left the tough money lenders holding the properties that have been upside-down in value and declining every single day. Many hard money lenders lost everything that they had as well as their clients who loaned them the money they re-loaned.
Since that time the lenders have drastically changed their lending standards. They will no longer take a look at ARV but loan on the purchase value of the property which they need to approve. The investor-borrower must have a satisfactory credit standing and set some cash inside the deal – usually 5% to 20% depending on the property’s purchase price and the lender’s feeling on that day.
However, when all is said and done, Moneylender Singapore Review still make their profits on these loans from your same areas:
The interest charged on these loans which can be between 12% to 20% depending on competitive market conditions between local hard money lenders and what state law will allow.
Closing points are definitely the main source of income on short-term loans and range from 2 to 10 points. A “point” is equal to one percent in the amount borrowed; i.e. if $100,000 is borrowed with two points, the charge for your points is going to be $2,000. Again, the volume of points charged depends on the amount of money borrowed, enough time it will probably be loaned out as well as the risk towards the lender (investor’s experience).
Hard money lenders also charge various fees for pretty much anything including property inspection, document preparation, legal review, along with other items. These fees are pure profit and really should be counted as points but they are not as the mixture of the points and interest charged the investor can exceed state usury laws.
These lenders still examine every deal just as if they will need to foreclose the financing out and take the property back – these are and always will be predatory lenders. I would guess that 5% to 10% of all hard money loans are foreclosed out or taken back with a deed in lieu of foreclosure.
So with the exception of the stricter requirements of Moneylender In Singapore, there has been no fundamental changes regarding how hard money lenders make their profits – points, interest, fees and taking properties back and reselling them.
These lenders also look at the investor’s ability to repay the loan monthly or to make the required interest only payments. If you visit borrow hard money, be prepared to might need some of your personal money and possess lmupww in reserve to help you carry the financing until the property comes.