No Upfront Fee Hard Money Loans Explained Winston Rowe & Associates

HARD MONEY LENDERS ONLINE WITH NO UPFRONT FEES

Winston Rowe & Associates is a unique type of commercial real estate finance firm, they do not charge any upfront fees like their competitors to review or perform due diligence for your transaction, because of this savvy investors have been turning to them for their financing needs.

If you would like more information about Winston Rowe & Associates, you can contact them at 248-246-2243 or visit them online at http://www.winstonrowe.com

Overview

A hard money loan is a specific type of financing in which a borrower receives funds based on the value of a specific parcel of real estate. Hard money loans are typically issued at much higher interest rates than conventional commercial or residential property loans and are almost never issued by a commercial bank or other deposit institution.

Hard money is similar to a bridge loan which usually has similar criteria for lending as well as cost to the borrowers. The primary difference is that a bridge loan often refers to a commercial property or investment property that may be in transition and not yet qualifying for traditional financing. Whereas hard money often refers to not only an asset-based loan with a high interest rate, but can signify a distressed financial situation such as arrears on the existing mortgage or bankruptcy and foreclosure proceedings are occurring.

Loan Structure

A hard money loan is a species of real estate loan collateralized against the quick-sale value of the property for which the loan is made. Most lenders fund in the first lien position, meaning that in the event of a default, they are the first creditor to receive remuneration. Occasionally, a lender will subordinate to another first lien position loan; this loan is known as a mezzanine loan or second lien.

Hard money lenders structure loans based on a percentage of the quick-sale value of the subject property. This is called the loan-to-value or LTV ratio and typically hovers between 50-65% of the market value of the property. For the purpose of determining an LTV, the word “value” is defined as “today’s purchase price.” This is the amount a lender could reasonably expect to realize from the sale of the property in the event that the loan defaults and the property must be sold in a one- to four-month timeframe. This value differs from a market value appraisal, which assumes an arms-length transaction in which neither buyer nor seller is acting under duress.

Below is an example of how a commercial real estate purchase might be structured by a hard money lender:

65% Hard money (Conforming loan)
20% Borrower equity (cash or additional collateralized real estate)
15% Seller carry back loan or other subordinated (mezzanine) loan

History of Hard Money

Hard Money is a term that is used almost exclusively in the United States and Canada where these types of loans are most common. In commercial real estate, hard money developed as an alternative “last resort” for property owners seeking capital against the value of their holdings. The industry began in the late 1950s when the credit industry in the US underwent drastic changes (see FDIC: Evaluating the Consumer Revolution).

The hard money industry suffered severe setbacks during the real estate crashes of the early 1980s and early 1990s due to lenders overestimating and funding properties at well over market value. Since that time, lower LTV rates have been the norm for hard money lenders seeking to protect themselves against the market’s volatility. Today, high interest rates are the mark of hard money loans as a way to protect the loans and lenders from the considerable risk that they undertake.

Cross Collateralizing a Hard Money Loan

In some cases the low loan to values do not facilitate a loan sufficient to pay the existing mortgage lender off in order for the hard money lender to be in first lien position. Because securing the property is the basis of making a hard money loan, the first lien position of the lender is usually always required. As an alternative to a potential shortage of equity beneath the minimum lender Loan To Value guidelines, many hard money lender programs will allow a “Cross Lien” on another of the borrowers properties. The cross collateralization of more than one property on a hard money loan transaction, is also referred to as a “blanket mortgage”. Not all homeowners have additional property to cross collateralize. Cross collateralizing or blanket loans are more frequently used with investors on Commercial Hard Money Loan programs.

Commercial Hard Money

Commercial hard money is similar to traditional hard money, but may sometimes be more expensive as the risk is higher on investment property or non-owner occupied properties. Commercial Hard Money Loans may not be subject to the same consumer loan safeguards as a residential mortgage may be in the state the mortgage is issued. Commercial hard money loans are often short term and therefore interchangeably referred to as bridge loans or bridge financing.

Commercial Hard Money Lender or Bridge Lender Programs

Commercial Hard Money Lender and Bridge Lender programs are similar to traditional hard money in terms of loan to value requirements and interest rates. A commercial hard money or bridge lender will usually be a strong financial institution that has large deposit reserves and the ability to make a discretionary decision on a non-conforming loan.

These borrowers are usually not conforming to the standard Fannie Mae, Freddie Mac or other residential conforming credit guidelines. Since it is a commercial property, they usually do not conform to a standard commercial loan guideline either. The property and or borrowers may be in financial distress, or a commercial property may simply not be complete during construction, have its building permits in place, or simply be in good or marketable conditions for any number of reasons.

Winston Rowe & Associates also has an excellent knowledge based free investor resource for real estate investing, valuation and analysis located at:

http://www.winstonrowe.com/Free_Real_Estate_Resources.html

Winston Rowe & Associates offers the best in traditional and private and hard money commercial real estate financing programs. When you call them with a loan scenario, they quickly assess what type of financing is appropriate for your situation. Then utilize their direct access to the most aggressive investor sources in the world to create a customized financing solution for clients.

Winston Rowe & Associates
31408 Harper Ave
Suite 147
Saint Clair Shores MI 48082
248-246-2243

Winston Rowe & Associates has loans in the following states.

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine,  Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee,   Texas, Utah, Vermont, Virginia,   Washington, Washington DC, West Virginia, Wisconsin, Wyoming

About Winston Rowe & Associates
Winston Rowe & Associates, a national no upfront fee advisory and due diligence firm specializes in structuring complex debt, private equity, private capital (hard money), and agency commercial real estate financing solutions. Commercial real estate types include; Apartment Buildings, Hotels, Office Buildings, Medical Buildings, Shopping Centers, Assisted Living Facilities, Senior Housing, Student Housing and Mixed Use properties, no raw land please. CRE investors have been turning to Winston Rowe & Associates, across the nation because there is a shortage of reliable, ethical and honest capital sources in the current banking market place. Winston Rowe & Associates has strong relationships with a finite number of direct private capital, private equity, hedge funds, agency investors and regional and national commercial banks, each with a highly targeted commercial real estate financing practice. Their expertise adds value and speed, structuring solutions for their client's complex and challenging financing requests. In days, not weeks or months. Prospective clients with questions concerning their hard money loan programs can contact Winston Rowe & Associates at 248-246-2243 or visit them on line at http://www.winstonrowe.com

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