Updated over 9 years ago on . Most recent reply
Hard Money/Private Lenders
I recently did a deal that was privately funded. I financed 100% of purchase and repairs. The issue i ran into was that when i went to refi, the home did not appraise. I now had to come up with a lot of cash to refior continue to pay on an interest only loan. A property that was going to be a great cash flow property nowhas no cash flow and no equity. I'm lucky because I was working with a family member that allowed me to just continue making payments, so i wasn't really hurt by the deal other than my time.
My question: What would happen if this would have been a Hard Money lender or a private lender that wasn't family and they called the note after 12 months and i couldn't get them the money? Is it typical for them to foreclose in this type of situation, extend the note? I was able to continue making payments, so the only issue would have been getting the cash for the entire loan price.
Most Popular Reply
Scott,
I have had experience with many HML where I was the borrower and now lend as well so I can give you two different perspectives.
As a borrower, I was forced to renew for 1 year with a 5% penalty or payoff the loan. I decided to refinance and put up the cash required instead of the large fee.
As a lender, we offer our borrowers the opportunity to extend in 3 month increments with a 3/4% fee.This can be done up to 3 times which would end up with a loan that lasts 1 year and 9 months.
We also use our contacts of banks and mortgage brokers if needed to help the borrower refinance.
Of course, this is dependent on the fact that the borrower is currently in good standing.