Investor · Alameda, CA · Member since 2012 · 47 posts · 10 votes
Hello BP community,
Hoping someone has some light to shed on this question:
Can an investor guarantee the principal and interest on a private money loan?
I was told by a rehabber that it is illegal, but am not able to find any information supporting that claim. Now structuring our own deals, we want to offer such guarantees to our private money partners, but want to make sure they are kosher.
Real Estate Lender · Lenexa, KS · Member since 2013 · 17 posts · 10 votes
11y
Hello Olga,
This is probably state specific so I am going to avoid making a blanket statement. I will also preface my answer by saying that we are a hard money lender in the Kansas City area so there may be some differences both by state/region and by type of lender.
We REQUIRE all of our loans contain personal guarantees. That simple, nothing to discuss. If the borrower will not provide a guarantee then they must not believe they will be able to pay it back so why should I lend them money.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
11y
Ridiculous. At best, your rehabber buddy is confusing owner occupant purchase mortgages being non recourse, as per CA statutes. Of course, this doesn't apply to investor loans.
Investor · Alameda, CA · Member since 2012 · 47 posts · 10 votes
11y
Thank you for your input everyone. I agree, the rehabber might not have been accurate in his statement, especially that it would mean he had to guarantee the interest on our deal.
I do know that the standards are sometimes different for banks and private money lenders, but sounds like the consensus is that there is no issue with the borrower guaranteeing it to the lender.