Many of the “real estate experts” stress the importance of using other people’s money (OPM). These “experts” say that it’s better to invest with other peoples money because then you get a greater return on your investment. If you’re not confident in your real estate investment enough to be using your own money, then you probably shouldn’t be taking that investment option. But that’s not the point of this article, today we will talk about hard money.

Privately funded loans with high interest rates and fees intended for temporary financing are known as hard money loans. These loans are “hard” because they have very strict terms and expensive fees. Hard money loans aren’t cheap. They usually have an upfront origination fee of 3 to 5 percent, and double digit interest rates.

The main difference between hard money loans and traditional mortgage loans is the criteria used to determine finance worthiness. The loan worthiness for traditional financing is determined by the borrower. The lender will only loan money if the borrower has a good credit score, a low debt to income ratio, and a consistent stream of income in which they will be able to pay for the debt. Hard money lenders place their emphasis on the value of the real estate. When the value of the property is worth significantly more than the amount financed, hard money lenders will typically grant financing. If the borrower happens to default, the hard money lender doesn’t have a problem foreclosing on a property with substantial equity.

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A recently invented financial alternative for homeowners who need a second mortgage are the 125 secured loans. Homeowners now have a new financial alternative for getting a second mortgage on their homes. This kind of loan allows the homeowner to be given a loan amount that is 1.25 times the home’s appraised value. This is to be contrasted to the usual home equity loan that only provides 75 to 80 percent of the home’s estimated value. The borrower must realize, however, that any outstanding balance on the previous loan will have to be subtracted.

The benefits provided by 125 secured loans are indeed surprising because what this means is that the 25 percent extra loan amount is not secured. What this means is that the extra 25 percent is risky for the lender. To compensate for the added risk, the lender will charge higher interest rates and this is one of the disadvantages of this type of home equity loan. The borrower would be wise to consult some experts on the matter before proceeding with the loan because there are also other disadvantages that will be seen later.

To determine whether a particular borrower is eligible for the 125 secured loan, the lender looks at his credit score. It is usually the case that a minimum credit score will be required by the lender to try to increase the chances that the borrower will be able to pay the loan. The length of stay of the borrower in that particular house will also be an important factor for the lender. The length of stay in that home should be at least three months for the owner to be considered eligible.

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Real estate investing probably makes you think of a number of things (like hard money). You might immediately leap to real estate investing being real estate portfolios and real estate retirement plans or you may think instead of short sales, bulk reo investing and virtual real estate investing. Likely you also wonder how these things will factor into your life as a real estate investor in the current economy.

There is a lot to learn about real estate investing. The best way to optimize your real estate investing education is to know the basics ahead of time. Whether you are interested in short sales, bulk reo sales, virtual real estate or just improving your abilities as a real estate investor, you need to know some real estate investing basics in order to succeed. Here are three real estate investing basics that even some experts do not really know:

1. Real estate investing education is a true investment that always has a positive yield. In any real estate deal, there will be thousands of dollars in potential wealth. Understanding how to get that wealth will be the key to your success. Learning as much as possible about real estate will increase your odds of success whenever you do a real estate deal. Small investments in education yield big results upon implementation.

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A number of things likely come to mind when you think of real estate investing (like hard money). You likely leap to real estate investing as real estate portfolios and real estate retirement plans, and then you may expand to thinking of short sales, bulk reo investing or virtual real estate investing. You may also consider what roles these things play in your life as a real estate investor in different economies.

There is a lot to learn about real estate investing. The best way to optimize your real estate investing education is to know the basics ahead of time. No matter whether you are interested in short sales, bulk reo sales, virtual real estate or just enhancing your knowledge as a real estate investor, knowing some real estate investing basics will help you succeed. Here are three real estate investing basics that even some experts do not really know:

1. You will always end up with a positive yield when you invest in real estate investing education. In any real estate deal, there will be thousands of dollars in potential wealth. Understanding how to get that wealth will be the key to your success. Learning about real estate increases your chances of success when you do a real estate deal. Implementation of your small educational investments yields big results.

Read the rest of this entry