Bernstein & Feldman, P.A.

Providing Personal Counsel
And Representation For Over
30 Years

Hard money commercial real estate loans

Home buyers in Maryland and around the country often have little trouble finding a mortgage lender, but obtaining financing can be extremely difficult for commercial real estate investors and developers. Homeowners tend to stay in their properties for many years, and their mortgages are generally based on their credit history and earning potential. The ownership of commercial properties is often far more fleeting, and hard money lenders frequently make their decisions knowing that the property in question may be sold within a matter of months.

This type of commercial real estate financing is inherently risky for lenders, and hard money loans often feature higher interest rates and may require large amounts to be paid upfront. However, they can be an attractive option to developers or investors who are working with tight schedules because decisions are generally made quickly. These loans are most often made by private groups rather than traditional banks, and they rarely advance more than 75 percent of the property's appraised value.

While hard money loans may be viewed by investors as an option of last resort due to the costs involved, they do have some advantages over more conventional financing options. Credit ratings are less important because loan decisions are based upon equity, and the two- to three-year terms offered are generally shorter than traditional bank loans.

Choosing the appropriate financing package is one of the decisions made by real estate developers and investors that can cast a long shadow. While an injection of capital can be a blessing when deadlines loom, the costs of short-term financing can add up quickly. Attorneys with real estate financing experience may study loan documents closely for clauses that could create problems in the months ahead.

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