Hard Money Line Of Credit: Who Knew There Was Such Thing?

Everyone has heard about equity lines from a regular bank. As with most bank loans these equity lines require that the borrower qualifies which includes having good credit. Some people, and especially, business owners, often do not qualify for these kinds of loans. This is because they cannot show their income clearly enough or their credit history does not pass the bank’s standards.

But there is great news. Now there is a hard money line of credit available. A hard money line of credit is like an equity line that you would get from a bank like Bank of America or Wells Fargo. You only pay interest on the money you use. That is the beauty of such a loan; you only pay interest on what you use. That is a lot cheaper than taking out a loan that you will not need for a while, yet you are paying interest all along.

A hard money line of credit is a great tool if you know you will need hard money at some point, and you want to have it ready to go when you need it.

For example, a person owned property in Los Angeles worth 5 Million dollars. The property was burdened with a small loan in the first position of only $750,000. The equity in the property, therefore, was $4.25 million. The owner was looking to buy a motel in Arizona for $750,000. The timing for the motel purchase was not quite clear yet.

Rather than waiting until the last minute, the property owner got a hard money line of credit for $750,000 to buy the motel when it is available. She didn’t have to pay interest on this money until she needed it. Perfect! It is a tremendous money saver. It also saves stress because she was not among borrowers who wait until the last minute and then stress about whether they will get their money in time to close their deal. Furthermore, she was able to make a cash offer which helped her outcompete other investors and get the property.

This hard money line of credit can be in place for up to three years. You can borrow up to 60% loan-to-value, up to a maximum of $5 million dollars. In this current market, the rates are from 9 to 10%.

Equity is by far the main criteria to qualify for a hard money line of credit. We also use a common-sense lending philosophy. That means if your credit is not great, we just want to understand why. We understand that there are many reasons why a credit score is low enough to make a bank feel uncomfortable with underwriting your loan.

The bottom line: If you have plenty of equity in a property a hard money line of credit might be a great tool for you. With this tool, you will have money ready to go to pursue your project, and you do not have to pay interest on the money until you need it.

Contact us to learn more.

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