The 5 Most Common Questions About Hard Money Loans

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The 5 Most Common Questions About Hard Money Loans

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Lender · Salt Lake City, UT · Member since 2012 · 714 posts · 169 votes

For those who have never obtained a hard money loan, there are typically a lot of questions. Here are some of the most commons questions and answers about private and hard money loans:

1. What exactly IS a hard money and or private money loan? – A hard money or private money loan is a non-bank loan. Whether the source of the loan is a private individual, a fund, or an insurance company, a hard money or private money loan is any loan that comes from a non-bank source. Interest rates charged are typically higher than a bank loan, and loan terms are much shorter. One can expect to pay between 7% to 18% interest, and the loan term offered is between 90 days to 2 years.
2. Do some hard money lenders offer longer loan terms such as a 15, 20, or 30 year mortgage? -Typically a hard money / private money lender will provide a loan for a term of 90 days up to 5 years. Most hard money loans are made on a short-term basis. It is very rare to find a hard money or private money lender that will offer a loan term for longer than 5 years, however there are some exceptions.
3. Will a hard money lender give me 100% of the purchase price like the old days of hard money lending? - Before 2007, it was common to find hard money loans that would give you 100% of the purchase price of a piece of real estate. Since the real estate crash however, most hard money lenders will only give you a loan for a percentage of the purchase price. And these days, more emphasis is placed on the borrower’s ability to bring in a significant down payment. With most hard money loans, be prepared to bring in between 10% to as high as 50% on some real estate.
4. What if I have a bankruptcy, short sale, or a foreclosure on my credit? Can I still get a hard money loan? - Although there are some hard money lenders that will not make a loan to you under these credit-based circumstances, there are many that are still willing to make you a loan even if you have these types of marks on your credit report.
5. What kind of collateral can be used for a hard money loan? - Although most hard money lenders only use real property as collateral (real estate), there are some hard money lenders who will use jewelry, recreational vehicles, and other types of collateral to make a loan. However, it is difficult to find hard money and private money lenders that will accept such collateral. Most hard money lenders want to use real estate as the collateral for the loan.

What are some other common questions you see regarding hard money loans? Or, what would you add to the answers provided to the questions in this post? Please contribute to the discussion.

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Ann Bellamy
Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
14y

[/quote=Bill Gulley]In other words, those are the excuses for greed in most cases.
I'd bet too that many hard money lenders, don't have any underwriting experience but origination and processing experience. That isn't a bad thing, it's just that the higher rates and fees usually make up for the lack of a sharper cut on the deal. They also have limited funds and may have interest ticking on them for available funds, so that's another reason for the higher costs, the borrower may be paying for money they don't use. And, if there are investors they require a return and the broker/originator guy needs to feed his family too, so the costs go up.

Saying that a borrower with a credit score of 6 is a great risk may not be true at all with a 65% LTV loan, depends on the collateral, IMO. Many are simply asset based loans. I have made many loans successfully to people who had low or poor credit at 10%, wheree the credit issues were due to medical bills and bankruptcy, in fact someone who took bankruptcy is a better risk than one who is thin on ratios since they can't take bankruptcy again for 7 years.

You all need to understand too that most of my lending has been done under usury laws, so higher rates and points can be illegal on any residential loan. I made a ton without charging such high fees, so I attribute much of it to greed rather than prudent lending.....but if it's legal and someone is willing to pay it, by all means......

But I'd ask where the door was..... :)

Bill Gulley, it's difficult to not take this as an attack, but I'm going to assume you aren't automatically calling me greedy.

It's evident that you look at all hard money lending from the perspective of residential lending, based on credit scores, and consider hard money loans to be predatory.

However, in my experience and within my network, all such loans are

1. made to companies, not to people
2. are commercial loans
3. are asset based
4. are not related in any way to medical bills, credit scores, etc
5. are not made to "desparate people" but to businesses

It appears that you see everything from the perspective of residential lending, similar to the concept of "to the hammer, every problem looks like a nail" or whatever the heck that expression is.

So I'll simply assume that your comments are not intended as an attack, and when you ask where the door is, tell you to prevent posterior trauma upon departure. With all due respect, of course.

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  • John Jackson
    Investor · North Richland Hills, TX · Member since 2011 · 789 posts · 403 votes
    14y

    good thread...
    Although I work with HML's, I would say a few of the questions people may have would be:
    1) How much do I need to have to put down for a HML, such as...2% of the loan amount?

    2) what kind of closing costs can I expect?

    3) If I rehab the house within 90 days, but it look like I need another 90 to sell...how likely is the HML to extend, and what kind of fees would I be looking at?

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  • Account Closed
    OP
    Lender · Salt Lake City, UT · Member since 2012 · 714 posts · 169 votes
    14y

    Thanks John ! I'll answer your questions below. Thanks for contributing these questions, they're good ones....

    Your questions:
    1) How much do I need to have to put down for a HML, such as...2% of the loan amount?
    Answer: Varies by loan. Somewhere between 10% to 50% down is a good range. Again, depends on the deal.

    2) What kind of closing costs can I expect?
    Answer: Varies by loan, again. Loan fees are between 0% to as high as 7% of the loan amount depending on the non-bank lender you use.

    3) If I rehab the house within 90 days, but it look like I need another 90 to sell...how likely is the HML to extend, and what kind of fees would I be looking at?
    Answer: Definitely varies by lender. Always, always ask about extension options and how much they cost when getting a hard money or private money loan on a rehab deal. These can be costly, and don't take a "verbal" extension option. Get it in writing before closing on the loan!!!!

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  • John H.
    Massachusetts, MA · Member since 2009 · 144 posts · 31 votes
    14y

    How does the interest work on a hard money loan....if its 10% for 6 months on 100k would interest paid be about 5k ?

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  • Account Closed
    OP
    Lender · Salt Lake City, UT · Member since 2012 · 714 posts · 169 votes
    14y

    John H. - John, usually a hard money or private money loan is an interest only loan. In your example, if it's 10% interest only for 6 months on a $100K loan amount, your monthly payment is $833.33 (excluding taxes and insurance of course).

    1Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    14y

    5 questions?

    1. Why so high? (interest rate)
    2. Why so short? (loan term)
    3. Put how much down? (LTV)
    4. Why so many points? (Pre-paid interest)
    5. Where is the door? (No Thanks, I'm leaving)

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  • Account Closed
    OP
    Lender · Salt Lake City, UT · Member since 2012 · 714 posts · 169 votes
    14y

    Bill Gulley - ha ! love it.

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    14y

    There is certainly a use for such loans, when there is really a hot deal, when time really is of the essence with that deal, when you can still profit and when there is no other money available, it's a lst resort in my book, but if that's what it takes, go for it. Much of it I see as vulture or preditory lending, so be prepared to be eaten if you mess up.

    0Reply
  • Ann Bellamy
    Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
    14y
    Originally posted by Bill Gulley:
    5 questions?

    1. Why so high? (interest rate)
    2. Why so short? (loan term)
    3. Put how much down? (LTV)
    4. Why so many points? (Pre-paid interest)
    5. Where is the door? (No Thanks, I'm leaving)

    1. Because these are typically among the riskiest loans available, frequently on properties with no septic/sewer systems, or water/freeze damage, etc. Rates are commensurate with risk level
    2. If the hard money lender is lending primarily to rehabbers, a longer term will sink the deal, because all the profit will be eaten up by carry costs, including hard money interest, insurance, taxes, utilities, HOA fees, etc. Rehabbers, as many of you know, need to get in and out of the project quickly to maximize profit. In addition, some HML's make their money by turning the loans over quickly and because of points charged
    3. The amount down will depend individually on the lender and the project, it is sometimes a percentage of the purchase price, and sometimes based on the ARV. There is no one answer to this question.
    4. See #2 above. Some rehabbers are in and out of a deal in 3 months. The hard money lender would make very little if interest were charged only for those three months, and the return would not justify the effort involved on the lender's part.
    5. I'll refrain from answering that one.

    1Reply
  • Account Closed
    OP
    Lender · Salt Lake City, UT · Member since 2012 · 714 posts · 169 votes
    14y

    Ann Bellamy - Great answers Ann.

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    14y

    In other words, those are the excuses for greed in most cases.
    I'd bet too that many hard money lenders, don't have any underwriting experience but origination and processing experience. That isn't a bad thing, it's just that the higher rates and fees usually make up for the lack of a sharper cut on the deal. They also have limited funds and may have interest ticking on them for available funds, so that's another reason for the higher costs, the borrower may be paying for money they don't use. And, if there are investors they require a return and the broker/originator guy needs to feed his family too, so the costs go up.

    Saying that a borrower with a credit score of 6 is a great risk may not be true at all with a 65% LTV loan, depends on the collateral, IMO. Many are simply asset based loans. I have made many loans successfully to people who had low or poor credit at 10%, wheree the credit issues were due to medical bills and bankruptcy, in fact someone who took bankruptcy is a better risk than one who is thin on ratios since they can't take bankruptcy again for 7 years.

    You all need to understand too that most of my lending has been done under usury laws, so higher rates and points can be illegal on any residential loan. I made a ton without charging such high fees, so I attribute much of it to greed rather than prudent lending.....but if it's legal and someone is willing to pay it, by all means......

    But I'd ask where the door was..... :)

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  • Bryan Hancock
    Investor · Round Rock, TX · Member since 2010 · 8k+ posts · 4k+ votes
    14y

    Nobody is forcing one to take these loans. If you do a simple Google search you can find tens or hundreds of hard money lenders. With enough you can find the real market for the money.

    I think there is an under-served market for rehab and construction money on infill projects with high spreads in the 90% to 95% LTC region. Charging something like 10% with 1-2 points for this money instead of either 6/1 for bank money or 14/4 for hard money seems like a great market to be in. There are very few loaning here.

    I find all lenders try to fit everything into buckets when certain projects allow for great security interest even at a high LTC.

    The term of a the loan is a big thing to nail down along with what happens if the term is exceeded. Reducing points is a much bigger deal generally than reducing rates. Asking if you can pledge other collateral is another thing worth covering if you have anything of value.

    Bank money is cheaper only if your project duration is long or your equity is cheap. I honestly think hard money is a better solution for many projects given that they'll loan more. This is especially true if you're capital-constrained such that equity is very dear.

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  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    14y

    Much cheaper money in partners or private parties at a better rate with no points and a higher LTV.

    HML is a last resort in my book.The property would have to be so cheap it is a no brainer with insane amounts of equity to get out quick.

    These thin margins I am seeing flippers go off of these days there is no way I would put 50% down on those small margins and pay those rates.

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  • Ann Bellamy
    Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
    14y

    [/quote=Bill Gulley]In other words, those are the excuses for greed in most cases.
    I'd bet too that many hard money lenders, don't have any underwriting experience but origination and processing experience. That isn't a bad thing, it's just that the higher rates and fees usually make up for the lack of a sharper cut on the deal. They also have limited funds and may have interest ticking on them for available funds, so that's another reason for the higher costs, the borrower may be paying for money they don't use. And, if there are investors they require a return and the broker/originator guy needs to feed his family too, so the costs go up.

    Saying that a borrower with a credit score of 6 is a great risk may not be true at all with a 65% LTV loan, depends on the collateral, IMO. Many are simply asset based loans. I have made many loans successfully to people who had low or poor credit at 10%, wheree the credit issues were due to medical bills and bankruptcy, in fact someone who took bankruptcy is a better risk than one who is thin on ratios since they can't take bankruptcy again for 7 years.

    You all need to understand too that most of my lending has been done under usury laws, so higher rates and points can be illegal on any residential loan. I made a ton without charging such high fees, so I attribute much of it to greed rather than prudent lending.....but if it's legal and someone is willing to pay it, by all means......

    But I'd ask where the door was..... :)

    Bill Gulley, it's difficult to not take this as an attack, but I'm going to assume you aren't automatically calling me greedy.

    It's evident that you look at all hard money lending from the perspective of residential lending, based on credit scores, and consider hard money loans to be predatory.

    However, in my experience and within my network, all such loans are

    1. made to companies, not to people
    2. are commercial loans
    3. are asset based
    4. are not related in any way to medical bills, credit scores, etc
    5. are not made to "desparate people" but to businesses

    It appears that you see everything from the perspective of residential lending, similar to the concept of "to the hammer, every problem looks like a nail" or whatever the heck that expression is.

    So I'll simply assume that your comments are not intended as an attack, and when you ask where the door is, tell you to prevent posterior trauma upon departure. With all due respect, of course.

    4Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    14y

    Ann Bellamy, your assumption is correct, it was not directed at you and sorry for any implication, commercial lending is entirely different.

    My experience with HMLs is an issue when it is preditory and there are preditory lenders who really don't know if they are being preditory or not in many cases, primarily their lack of assuming risk and loan terms as they simply shoot for all the can get....the "This is what I loan money at".

    Ann, I'm not real sure what you do and certainly respect you based on your posts here that I have seen.

    As to commercial loans, just for clarification for readers who may think that if they loan money to an LLC with a personal guarantee that they are doing a commercial loan, that is not correct, loans are classified by the collateral taken, a loan on a single family dweiing (1-4) to an LLC is a residential loan, not a commercial loan. A loan to an individual on a property commercially zoned and used for commercial use is a commercial loan. While a state regualtor may have a different view, this is to federal compliance, so might as well classifications applicable to federal law. :)

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  • Ann Bellamy
    Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
    14y
    Originally posted by Bill Gulley:

    As to commercial loans, just for clarification for readers who may think that if they loan money to an LLC with a personal guarantee that they are doing a commercial loan, that is not correct, loans are classified by the collateral taken, a loan on a single family dweiing (1-4) to an LLC is a residential loan, not a commercial loan. A loan to an individual on a property commercially zoned and used for commercial use is a commercial loan. While a state regualtor may have a different view, this is to federal compliance, so might as well classifications applicable to federal law. :)

    Bill Gulley, if that were unilaterally true, then a builder who buys a piece of land, then takes a construction loan to put up a spec house, and holds as inventory til it sells, would be borrowing on a residential basis.

    That is simply not a residential loan. No one thinks it is, no one expects it to be residential, and conventional residential lenders won't touch it. It is a commercial loan to a businessman building houses, although the collateral is a single family house.

    Here is another clear cut example: a rehabber buys 4 single family properties at auction or tax sale or whatever. He takes a blanket loan to close on them, with a purchase component and construction component. He's in the business of buying and rehabbing and reselling houses. The collateral is single family houses, but this is certainly not a residential loan and no residential lender would touch it.

    So to say that all single family dwelling loans are residential loans is not accurate.

    1Reply
  • Michael Quarles
    Flipper/Rehabber · Bakersfield, CA · Member since 2008 · 3k+ posts · 3k+ votes
    14y

    I have had my fair share of HML. I see them for what they are. Short term solutions .

    Certainly they're better than wholesaling a deal because of lack of funding at least most of the time..

    I've often have suggested to new investors who were having valuation issues to have a HML tell you what it is worth.. They survive off of knowing values.

    And they're a great resource for finding deals. They typically have an inventory for sale and at the very least know who is desperate and could feed deals once you work the relationship.

    The man I use has a give back policy if the loan is paid within 90 days. Zero costs. No interest. Its his unique selling proposition and I get to take advantage of it.

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    14y

    Just as an example, the SAFE Act defines residential loans as 1-4 dwellings, mobile homes and vacant lots zonned residential. I do understand your logic and while it makes perfect sence, it is legally and technically incorrect. Loans are classified by the collateral taken, not by who borrows the money. They are also not defined by the intent of the borrower, to hold, rehab, flip, sell or live in.

    There are exemptions for construction loans for new construction as they may be classified as a commercial loan, but when completed may be classified as a residential loan.

    Homes on agricultural property may be classified as commercial if it is with one legal description, it may also be shaved off to a smaller parcel and be a residential loan.

    Zoning alone does not classify a property or loan as the use also is considered. You can have a residential loan on a commercially zoned area, if residential is common use in that area.

    These are loan compliance issues and determinations made by compliance officers in banks and institutional lenders required to classify a loan. A small HML (or even a large one) may not have the requirement to classify, but the definition of the laon will be determined as if they were from my experience as an examiner.

    You can make your determination, but anyone out there that thinks just because the loan is made to a flipper's LLC is a commercial loan and therefore not held to usuary laws or residential lending requirements may be in violation of applicable laws.

    As anyone might search for this topic, don't confuse the loan being classified or classified loans as non-performing or being classified as to credit risks, this is a portfolio classification for the type of loan. :)

    1Reply
  • Chris Goulart
    Hard Money Lender · Brentwood, CA · Member since 2011 · 5 posts · 3 votes
    14y

    This is not true. With what you are referencing, these loans ARE classified by the intent of the borrower. The definition of a residential loan is a loan made to a consumer. If the loan is not for consumer purposes, but rather for business purposes (fix and flip as a case in point), it does not meet the criteria of the specific regulation you are quoting.

    There are disclosure laws that are tagged simply by the type of property, but in your example, even if the security is a 1-4 residential property, if it is not a loan being made to a consumer it does not fall under this specific regulation.

    1. Why so high? (interest rate)
    2. Why so short? (loan term)
    3. Put how much down? (LTV)
    4. Why so many points? (Pre-paid interest)
    5. Where is the door? (No Thanks, I'm leaving)

    With fix and flip loans that I facliitate, the rate is typically 12-12.5%. The rate is so high due to the fact that the loans are very aggressive, and my investors are placing their money with the sole purpose of making a return on thier funds.

    Terms are typically 12 months, with no prepayment penalty. This is not so short when lending for a fix and flip, if you are holding a flip longer than 12 months, there are more problems than your financing!

    How much down? Typically speaking our borrowers bring about 20% of the TOTAL PROJECT COST to the table. Our financing covers the rest, including interest reserves (which are refunded if the loan is paid off prior to them being depleted) and funds for the actual rehab.

    Points can range greatly, the more aggressive the funding, the more points there are. Often times our loan amounts are greater than the actual purchase price of the home. This is pretty aggressive lending, to lend more than the purchase price is borderline speculation on the part of our investors. At the end of the day, however, if you hold one of our loans for 6 months, your cost comes out to somewhere between 10-14% of the amount borrowed depending on risk level. That may sound expensive, but it is much cheaper than taking on a partner who will likely want participation on the back end.

    It sounds like a lot of bashing of hard money lenders is going on in this thread without a clear understanding of what is really going on. Hopefully these explanations can clarify a little bit.

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    OP
    Lender · Salt Lake City, UT · Member since 2012 · 714 posts · 169 votes
    14y

    Chris Goulart - You wrote, "This is not true. With what you are referencing, these loans ARE classified by the intent of the borrower. The definition of a residential loan is a loan made to a consumer. If the loan is not for consumer purposes, but rather for business purposes (fix and flip as a case in point), it does not meet the criteria of the specific regulation you are quoting."

    You are incorrect. Check with your State Statutes. For example, in Utah, any loan collateralized by a residential property of 1-4 units, regardless of the intended us of the property, is governed by the SAFE Act. You are likely in violation if you are lending or brokering on residential properties 1-4 units and you are unlicensed. Again, check your State Statutes.

    Also, this thread was not meant for you to advertise your programs. Sorry but it's a discussion, not an ad.

    1Reply
  • Vladimir K.
    Real Estate Agent · Wheaton, IL · Member since 2008 · 66 posts · 32 votes
    14y

    when I checked out a few Chicagoland area lenders a few months ago, they were asking about bank accounts, all liabilities and the application process did not seem that different vs. applying for a real estate purchase loan.

    I'm not sure why all of that information is required if the loan is truly based off of the potential value of a given property.

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  • Chris Goulart
    Hard Money Lender · Brentwood, CA · Member since 2011 · 5 posts · 3 votes
    14y

    First off, I am not unlicensed. I'm fully licensed both under the California DRE and the NMLS.

    Second, I am not advertising my programs but rather giving information on why someone would pay higher rates for hard money. Since you give no examples, I chose to give an example. You don't see me offering up my phone number, website, etc here and asking people to call me, correct? I'm simply trying to give people accurate information, as people tend to believe whatever they read, regardless of the accuracy of the information.

    Of course hard money may sound very expensive if people believe they must put 50% down. When taken in context, however, the funds offered on these types of loans are often times actually less expensive than taking on a partner.

    Lastly, please go look up the definition of a residential mortgage loan. Perhaps it is different in Utah, but in California it is qualified as being a loan to a consumer. A business pupose loan would not be a consumer loan.

    Here is a direct quote from the definition that you can find at the DRE website:

    "A residential mortgage loan is any loan primarily for personal, family or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate upon which is constructed or inteded to be constructed a dwelling. Dwelling means a residential structure that contains one to four units, whether or not the structure is attached to real property."

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  • Ann Bellamy
    Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
    14y

    It may be one way in Utah, and a completely different way in NH and different again in another state. Although the SAFE act was federal, it can be interpreted differently when the local law was passed.

    For example, NH, which is the Live Free or Die state, has one of the most restrictive SAFE act laws in the nation. Go figure. In NH, you can own a gas station, free and clear. If you take out a mortgage and use the proceeds to pay for your kid's tuition (purpose of funds is household use) then it is regulated by the SAFE act and must meet residential guidelines.

    Not the case in MA. In MA a business purpose loan, even if the collateral is a single family house, can be a commercial loan. My attorneys in both states have been involved in discussions with banking commissions locally, and while the all agree that the intent was not to restrict commercial lending, the changes in verbiage are slow to be put in place.

    No legal advice intended, this is discussion only.

    It's turned into an interesting one, and thank you all for refraining from bashing hard money indiscrimately. Sometimes it may be deserved, as not all of those who choose to lend out hard money do so with the highest levels of integrity, but for the most part, it is simply a business transaction. A borrower can choose to use the product or not. Capitalism is alive and well, at least for the moment.

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    OP
    Lender · Salt Lake City, UT · Member since 2012 · 714 posts · 169 votes
    14y

    Ann Bellamy great way to conclude this discussion. Whew! Thanks Ann.

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  • Tracey Williams
    Investor · Columbus , OH · Member since 2010 · 311 posts · 51 votes
    14y

    Very interesting discussion on this post.
    I just wish we have more HML lending to OH. Lots of deals out here but very few lenders.
    Tracey

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  • Bill Worsley
    Hard Money Lender · Davidson, NC · Member since 2012 · 69 posts · 34 votes
    14y

    I have to chime in on this conversation. I want to make sure several things are clear as it relates to hard money as an important tool for real estate investors - feels like hard money lenders being thrown under the bus in this thread:

    1. Hard money is there when people need it. I love for my borrowers to be in a position where they have their own sources of capital and don't need me. Invariably, they have an opportunity and not enough cash, and are more than happy to bring us in as the lender so they can make a high percent of something versus 100% of nothing because they couldn't fund the deal.

    2. While the real estate investor borrowing hard money has performance risk, it is the lender who is taking the bulk of the financial risk and has the most to lose. Investor rehab lending is risky, and for taking on that risk, the lender should get a fair return on their investment. Just ask any hard money lender who was an active lender in 2007-2008 about the risks of lending hard money.

    3. Hard money is cheaper than an equity partner - allows the real estate investor to put more money in their own back pocket on a well managed deal than in the pocket of a money partner.

    4. As a hard money lender, I always challenge our borrowers to look at their overall return on their investment when using hard money. They are able to leverage their available capital and increase their cash on cash return significantly, and free up cash for additional deals.

    5. In regards to the questions around SAFE act. First of all, I am not an attorney, but I am in a business where I darn well better understand the impact on our business. SAFE Act is focused on the intent of the borrower - this is what determines Consumer Purpose versus Commercial Purpose. So for an investor buying a property with the intent to fix it up and sell it for a profit, their intent is a commercial purpose. If someone wants to borrower money against their office building to pay for their child's college tuition, that is a consumer purpose, and the loan falls under the SAFE Act. So while I loan on Residential property, I am a commercial lender because we only loan to individuals or entities borrowering for a commercial purpose.

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