We will refer to these loans simply as hard money equity loans. There are many myths and misconceptions about hard money that should be cleared up. The first and foremost of these myths is that a private investor is making a loan because he wants to foreclose and get access to the equity in the home. While there may be some cases where this is true, the vast majority of hard money investors are looking to make regular monthly interest profits and NOT go through the hassle of foreclosing on your home. Should the lender have to foreclose they are looking at many months where they will receive no profits on their funds.
People use hard money equity loans for a variety of reasons. As mentioned previously, conventional and Government lenders are continuing to further tighten their credit and underwriting guidelines making it more and more difficult for investors and homeowners to get access to the equity in their homes. Some of the most common scenarios we encounter from people using hard money equity loans include:
Inherited a property that is free and clear and have no credit or bad credit to get approved to pull cash out of it.
Paid cash for a property recently and need to get cash out of it (conventional and Government loans require 12 months seasoning on title where hard money loans have no seasoning requirement at all)
Already have more than four properties financed (conventional and Government loans will now allow more than four properties to be financed or t hey will not approve a loan, hard equity money loans have no financed property limitations)
Property Types that conforming and Government loans don’t finances are allowed with hard money equity loans such as mobile homes, raw land, condos and town homes.
Investors looking to purchase a home and need to close fast (conforming and Government loans can take 30-45 days but hard money loans can close in 3-5 days.
Not all hard money equity loans are the same. There are two different types of hard money equity loans that you can consider using:
- SIVA (Stated Income Verified Assets) Hard Money equity Loans or SISA (Stated Income Stated Assets)– These are true Hard Money equity loans. The lender is lending money based strictly on the amount of equity you have in your home and you either state or verify your income. These loans close very fast as the only thing to do is arrive at a fair value on the home and ensure the title work is in order. Interest rates on a SIVA (Stated Income Verified Assets) or SIVA (Stated Income Verified Assets) hard money equity loans can run higher then on a 10-30 year fixed rate mortgage.
- Full income documentation equity loans – These loans allow the home owner to get interest rates closer to 10% on a 20-30 year fixed rate mortgage. These fully documented hard money equity loans allow investors and home owners that can prove their income to receive better terms. These loans help fill the gap for investors with more than four properties financed, investors that need to close quickly on their home using hard money equity loans, and home owners with poor credit that banks will not finance.
If you have been considering a hard money equity loan or have been turned down by the bank but have equity in your home, we highly recommend calling Saxe Mortgage today. By this time next week you can have your equity in your bank account!