hard money loans..

14 Replies

I am looking into getting a hard money loan..I want to use my Paid off home for collateral. I'm looking for only less then 20% of the value of my home..Credit is terrible that is why I'm thinking of going this route I want maybe 2 years and am hoping for no out of pocket cash on my end..Is this possible with this type of loan? How do you go about finding these types of lenders..

Is this your primary residence you want the loan on?

Originally posted by @Debbie Schoemann:
Originally posted by @Aaron Pfeffer:

Is this your primary residence you want the loan on?

 Yes..

And there's the issue. HMLs like myself won't lend on a primary residence. You may find some that do in the form of a HELOC, but I haven't know any that will for quite some time. Wish I could help more...

Originally posted by @Aaron Pfeffer :

And there's the issue. HMLs like myself won't lend on a primary residence. You may find some that do in the form of a HELOC, but I haven't know any that will for quite some time. Wish I could help more...

 Why is that and what is a Heloc? By the way thank you so much for your time and information.I would think a loan on a home that is paid off would be a great loan for a lender.

Originally posted by @Debbie Schoemann:
Originally posted by @Aaron Pfeffer:

And there's the issue. HMLs like myself won't lend on a primary residence. You may find some that do in the form of a HELOC, but I haven't know any that will for quite some time. Wish I could help more...

 Why is that and what is a Heloc? By the way thank you so much for your time and information.I would think a loan on a home that is paid off would be a great loan for a lender.

 Another question. I do have another house, could I use that as my primary resident? 

Home Equity Line of Credit. HELOC. Some HMLs have given loans on primary residences in the form of a HELOC as long as the reason was for a business purpose, which allows them to avoid certain usury laws depending on the state. Which helps answer your question about why not your primary residence...as the restrictions on lenders are more severe. And rightfully so.

As for your other house...

You couldn't otherwise just say...that's really my primary residence so give me a loan on the one I'm living in that I'm not counting as my primary residence any longer. So that won't work. But if your other house (assuming it's an investment property and not just a vacation house) has equity in it as well, then the HML can be made on that home.

Debbie, the laws governing loaning to owner occupants are considerably different than the laws governing commercial loans. Thats why you'll have a lot of trouble doing the house you live in. You'll have to have pretty good credit to get those loans, especially a HELOC these days. Doesn't sound like your primary will work unless you find a private lender. Hypothetically your rich uncle could loan you the money and secure it against the house legally, but he cant be engaged in that activity as a business without the proper license and without following some pretty strict rules.

Very few HMLs are licensed to loan to owner occupants.  If you have a second home with sufficient equity, it'd be pretty easy to get the loan IF you have the cash reserves (3 mos payments).  I cant speak for Aaron, but for me you'd need to pass a background check and not have any bounced checks in the last 3 months.  Everyone will be a little different.  $50k minimum is pretty standard on that stuff.

Originally posted by @Aaron Pfeffer :

Home Equity Line of Credit. HELOC. Some HMLs have given loans on primary residences in the form of a HELOC as long as the reason was for a business purpose, which allows them to avoid certain usury laws depending on the state. Which helps answer your question about why not your primary residence...as the restrictions on lenders are more severe. And rightfully so.

As for your other house...

You couldn't otherwise just say...that's really my primary residence so give me a loan on the one I'm living in that I'm not counting as my primary residence any longer. So that won't work. But if your other house (assuming it's an investment property and not just a vacation house) has equity in it as well, then the HML can be made on that home.

 Thanks for your time..No the other house is not an investment home..I'm looking to pay off some bills. It's not a business  reason..Thank you so much I will just have to find the other type of lender. 

Thanks everyone for all the information. I have never dealt with loans, as we Paid cash for the house many years ago.I cannot understand not being able to get a loan on my home.I find that quite baffling.I thought private lenders could lend. I really don't understand the law forbidding that.First time in our lives we are in financial difficulty and want to take out a small loan on a home that is worth at least 6 times more and paid off.But if I didn't live in my home I could. I just find this confusing. Obviously our credit is not good now due to our financial situation for the last year. Actually I did find a mortgage company who would do it for a 30 year loan.We only need 2 years, not 30..There must be lenders who do do this some where..I just find this very interesting.

Why is it so different owner occupant, then commercial?

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@Debbie Schoemann ,

You mentioned that you found a mortgage lender who will give you a 30 year loan and you want a 2 year loan.  Just because it's a 30 year loan doesn't mean you have to pay it off over 30 years.  You can always pay it off early, but be sure to ask the mortgage lender if there are any prepayment penalties (for paying the mortgage off early).

As an example, let's say you get a $50,000 mortgage against your $300,000 house.  Your approximate payment will be $270 per month at 5% interest, or $300 per month at 6% interest.  If you paid $1,000 per month instead, you would be able to pay off your loan in roughly 6 years.  Or, you could pay $300 per month for 24 months, and on month 25 pay $48,000 to pay off the balance of the loan.  anything you pay above the monthly mortgage payment goes directly towards reducing your principal balance (the amount left on the mortgage).

Even if you have cruddy credit, you can apply for a mortgage, you'll just get a high interest rate.  But if you're comfortable paying that (which it sounds like you are if you're looking at a hard money lender) then I would work with the mortgage lender you mentioned would work with you.

@Debbie Schoemann

  just go to a local credit union they will take care of you.

I am a licensed HML here in Oregon that requires a NMLS license however don't owner occ as the liability and the extra paper work are not worth it.

Credit union I bet will help you with  free and clear home

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