Luxury Mortgage Blog

As the mortgage market continues to tighten the availability of residential mortgage money, many former qualified investment home borrowers are turning to hard money lenders to facilitate their needs.  In the first half of February of 2008, we’ve witnessed a massive resurgence of borrowers requesting this type of financing.

A hard money loan is typically defined as a loan that mortgage banks won’t do.  They range from borrowers with low FICO scores all the way up to complex commercial deals invoking blanket or bridge financing.  The lenders offering these funds are typically lesser known pools of funds put together by former mortgage brokers now turned hard money lenders. 

With the recent tightening of institutional financing and the folding up of 200+ lending institutions, these types of hard money pools are gaining popularity with former mortgage brokers faster the any new FHA reform you may hear about. 

These new hard money lenders bring on wealthy investors and pay them a sizeable return of approximately 10-12% for the use of their money.  They then loan the money out and keep the origination fees that they collect from the borrower.  Additionally, they typically charge their pool of investors a 1% fee for servicing all of the borrower’s monthly payments and collections.

In the past, and to some degree still today, hard money loans carry a stigma of ill repute.  This comes from the high fees (points) and exorbitant interest rates that nearly all of these lenders charge.  Interest rates of twelve percent are a normal starting point for these costly loans.  Origination fees are also high, typically ranging from 3-8 points (3-8 percent of the total loan amount borrowed.)

Interestingly enough, for some borrowers, this type of loan is a wonderful thing.  Residential investment mortgage loans have nearly dried up while the number of pennies-on-the-dollar foreclosure homes has gone through the roof.  In many cases, residential home investors are now forced to utilize hard money financing to purchase homes.  Traditional lenders used to allow investors to finance as many homes as they could reasonably afford.  With lenders feeling the pinch from sub-prime losses, they have nearly all restricted the max number of financed properties to four.  With the advent of the hard money lender comes relaxed guidelines and a more common sense approach to lending.

Hard money lenders typically loan at a maximum of 65% of the purchase price of a home or its appraised value on a refinance.  For a hard money lender, this gives a tremendous cushion and a firm reassurance that a borrower will pay their monthly hard money mortgage payment.  After all, if they don’t pay, the hard money lender will foreclose and own the home at a roughly 35% discount. 

There are few other qualifications to a hard money loan besides having “skin in the game” (having the 35% to put down on a purchase or at least 35% remaining equity in a home when refinancing.)  A few newcomers require the borrower to have a FICO score of 620+ but most old timers in the business still loan to anyone with a 65% LTV or lower.

If you are looking for a hard money loan on an investment property, a residential refinance or a commercial transaction your first stop should be to visit our friends at Las Vegas Hard Money.  They provide hard money loans strictly based on LTV (Loan-to-Value Ratio.)  They are the only technologically savvy source of hard money with a website that instantly gives you a lending decision.  Their website automatically pulls down the property valuation and divides it by the mortgages requested, thus providing a fully-automated immediate hard money decision.

Luxury Mortgage Group assists in the placement of funds for this pool as well as consults investors with diverse yield requirements from all over the US and abroad.  If you are interested in investing in hard money mortgage backed securities, continue on to our corporate website where you can read about investing in hard money.

If you have additional questions regarding hard money investing or obtaining a hard money loan contact:

Call Jason Fox / President
at (702) 444-0400 x1
Continue on to our 2 minute mortgage pre-approval form.
Or complete our full online mortgage application.

Tags: · Hard Money · hard money investing · hard money lenders · Las Vegas Hard Money · skin in the game ·
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