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A History of Hard Money Loans
These types of loan are most common exclusively in
the United States and Canada, where the term “hard money” first
originated. Hard money loans originated in the commercial real estate
field, the developers used these loans as a last resort to seek capitol
for their valued property. These hard money loans began in the late
1950s when the credit industry in the US was undergoing a great deal of
changes and people were having a hard time getting any type of loan from
the bank or government.
The hard money industry suffered severe setbacks during the real estate
crashes of the early 1980s and early 1990s because of lenders
overestimating and funding properties at well over their market value.
Ever since this time, lower Loan-To-Value rates have been used for hard
money lenders trying to protect themselves against the markets.
The government has always unregulated the interest rates and loan
structures of hard money loans, however there are a few states that do
keep regulations and tabs on their hard money lenders.
When hard money loans first came to be the terms and conditions were
generally held for only small periods of time. As the popularity of hard
money lending grew, the length of the loans did as well, enabling people
to loan for up to 5 years. The same happened with the interest rates,
they started out as low as 3% and when the popularity grew so did the
desperateness of the hard money clients. The lenders began to realize
just how much they could charge their clients and they had but no other
choice to accept these terms.
This alternative financing method grew and grew; its only downfall
consisted of the real estate crashes in the 1980s and 1990s, making the
hard money lenders a bit uneasy about their current lending strategies.
Hard money lenders were hard to locate then as they are today. Hard
money lenders like their clients to find them, not the other way around.
This shows their need for the loan to be that much stronger and
necessary if they track down the hard money lender in their area.
Learning a bit about the history of this loan type can help you to see
why it may be something for you. In addition, it gives you a perspective
of what this type of loan is all about. Is a hard money loan right for
your needs? |