A hard money loan is an equity-based loan used as a bridge to fund the borrowers immediate financial needs. Generally it is a short-term solution (six months to three years) for clients who need fast money. Most hard money loans are used for projects lasting from a few months to a few years. It is used for all types of real-estate secured financing such as commercial, retail, industrials, raw land, construction, rehabilitation, single family residence, and multi-family properties.
At the simplest level, trust deed investing is when an individual lends money to a borrower through the services of a broker. The source of this money can be from savings, credit lines, or retirement accounts. The broker finds the borrower who wants the loan, and the private party with the money provides the funding. The broker then arranges for the borrower to sign paperwork to show the world the agreement to borrow money and the terms.
A deed of trust, once signed by the borrower, is recorded at the County Recorder’s office where the collateral is located. The recording of the trust deed “clouds” the title and lets the world know that the debt exists. When a title company researches a property, it is usually looking for trust deeds (or evidence of indebtedness). The recorded trust deed is also the trust deed investor’s security; it allows him/her to be paid when the property is sold.
There are three main differences between a mortgage state and a trust deed state. In a mortgage state:
1. The foreclosure process goes through court, and it is more costly for the lender to get the property back because lawyers will be involved.
2. The foreclosure process usually takes longer, which delays the lender from regaining control of the property for a lengthy period of time.
3. The mortgage foreclosure process (judicial) usually allows the lender to obtain a deficiency judgment for any losses not covered by the sale of the property. This is not allowed in a trustee sale.
The trust deed investment would be preferred over a mortgage investment because the lender can foreclose on the property quickly and at a lower cost. We much prefer making loans using a trust deed.
It is pretty simple. Just contact us for a loan quote and we will provide the loan application. Once we receive the loan application we can issue an approval within 24 hours.
Bank rates are much lower but getting a bank to lend is another story. With all the new banking regulations and guidelines, the higher rates with private money is often times the only option available to a borrower. Many borrowers are using our money to purchase properties at greatly reduced prices and anticipating very high profits at some point in the future. As such, it is worth it to the borrower to pay for the use of our money. We are also not restricted due to low credit and are able to creatively finance a deal many lenders would turn down.