HGRN Commercial Lending arranges private money loans (hard money) through affiliate entities. These loans are only secured by 1-4 family “investment” property/properties or commercial real estate. At this time, the maximum loan to value we lend is 65%.
These loans are not traditional bank loans. They are used by investors to expedite the closing process with minimal paperwork (appraisal + title = close!).
The rules for these loans are very simple:
- the property must be an investment property.
- the maximum we can lend is 65% of the value of the property appraisal (the report provided by a third party to determine the property value).
Sometimes we use this program for properties that we do not have the ability to go inside and inspect. Other times we use this loan to “bridge” from one conventional loan to the other. For example, when an existing loan “balloons” or comes due (which is a standard practice with commercial banks), they will lend money for 5 years with a payment based over thirty years. However, the existing bank wants the full note (mortgage) paid by year 6.
The existing lender requires payment immediately, unless arrangements have been made. If the client has not already started their refinance process with another lender or with HGRN (which can take 30-60 days), they may opt for a private money loan in order to pay off existing note and “bridge” (give themselves some time) while they arrange conventional financing. Another example is using the private money to quickly rehabilitate a property for resale. HGRN has done multiple transactions like this. This is referred to as a Fix & Flip (you may have seen some TV shows that illustrate this process).
Private money loans are used when speed and execution is needed. You can also use it to bail a property out of foreclosure and restart a positive payment history. We believe that clients should have the time and opportunity to stabilize their properties. Life happens and sometimes you need a helpful lending institution. We look at the story and then we arrange for financing (closings in as little as 10 days).
That is what we do with our private money loan programs (Hard Money) at HGRN.