How Hard Money Loan Borrowers in California Are Protected by New Laws
If you are looking to buy a property and are considering a cash loan (aka HELOC), you are better protected than ever because consumer and federal laws have put in place many rules in your favor. Additionally, the Consumer Protection Agency recently tightened its grip and sent out research to determine how the process could be made more secure.
What is a fixed-term loan?
Generally, mortgage borrowers turn to traditional lending institutions, such as banks and credit unions, and lend to them based on their FICO scores and credit history. Anyone who is self-employed or has a poor credit rating will almost certainly be turned down. You can also check hard money loan in California at wilshirequinn.com/california-hard-money-lender/.
Image Source: Google
How does it work?
Lenders look at the value of the collateral, not your creditworthiness. If your property promises a profit, you run the risk of getting the money you need to repair or buy it.
To offset the risk, private money or cash, lenders – also known as "link lenders" – charge high-interest rates and large upfront payments (usually double that of traditional loans).
Historically, coin lenders have also offered low loan-to-value (LTV) ratios — that is, very low values for your property; However, in major Californian cities, this is starting to change. If you fail to meet your obligations, the creditor will keep your property.
2015 was a difficult year for the people of California. House prices are out of control and most forecasts say they will continue to rise in 2016 due to the Fed's plans to raise interest rates. A large number of borrowers failed to make payments.