Saturday, 19 August 2017

Hard Money Lending Terms You Need to Know

Written by Posted On Monday, 19 June 2017 15:41

Getting involved in real estate investing can be a complicated process for beginners, especially because of all the industry-specific jargon that gets thrown around when talking about real estate. So, to help you get used to your new vocabulary as a real estate investor, so we’ve put together a glossary of key terms that you’ll need to learn in order to navigate the world of real estate investing:

 

Acceleration Clause -  A clause found in mortgages and deeds of trust that allows the lender to accelerate the due date of the debt if certain requirements have not been met.

 

ARV – ARV stands for “After Rehab Value.” This is an estimate of how much a property is expected to be worth after all of the planned renovations are complete.

 

Amortization -  A fixed repayment schedule for a loan, outlining the specific period of time over which the principle is to be paid down.

 

Cross Collateralization -  A Lending technique involving putting a single loan on two or more properties.  This lien is sometimes called a “blanket loan”.

 

Default -  The primary reason borrower’s default on mortgage loans is sustained failure to pay interest or principal on a loan, however there are other reasons for default such as failure to pay property taxes or insurance, transferring title to another party with the lender’s approval, etc…

 

Distressed Property – A home or other property that is in poor condition and/or in foreclosure.  Distressed Properties are often good candidates for fix and flip investments.

 

Escrow Holdback Account -  An account run by a third party other than the lender or investor. The funds in an escrow holdback account are held by the escrow agent until predetermined contractual obligations have been met.

Foreclosure - The process by which a lender legally takes control of a property because the borrower has defaulted on loan payments or otherwise failed to meet contractual obligations.

 

Hard Money Loan - A loan acquired from a private lender, or hard money lending group, as opposed to a loan from a bank or institutional mortgage lender. Hard money loans are often sought by those who are in need of quick financing since this type of loan typically has a much faster closing time than a traditional bank loan.

 

Settlement Statement - A form created by the real estate transaction’s settlement agent which lists all of the costs, fees and charges incurred and/or paid to the buyer, seller, title company, escrow company, lender, and any miscellaneous third parties in a real estate transaction.

 

Lien on Real Estate - A legal claim on real estate giving the lender a specified amount of money when the property is sold or transferred. Real estate liens are typically used to guaranty the payment of a debt, with the real estate acting as collateral against the amount owed. A mortgage or deed of trust is an example of a real estate a lien.

 

Loan Officer -  Representatives of banks, credit unions and other financial institutions that assist borrowers in acquiring loans and working out the details of their loan agreements.

 

Mixed Use – A mixed-use property is a type of a commercial property that includes both commercial and residential units.  An example would be a ground floor retail store with residential apartments on the upper floors.

 

ROI -  ROI stands for “Return on Investment.” This is a measure used to calculate the percentage of invested money returned to an investor after subtracting associated costs. ROI is generally calculated by subtracting the cost of the investment from the money gained from the investment, and then dividing that number by the cost of the investment.

 

Short Sale – A property that is being sold for less than what the seller owes on their mortgage.

Vantex Capital Group can help you with all your hard money lending needs and questions.

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