Private Money Loans

Before we discuss Private Money, did you see the forecast of home appreciation for 2010 in Money Magazine (see it on-line CNNMoney.com)? Santa Rosa's forecast is the highest in the United States. Money Magazine says we should have 6% appreciation in 2010! Combine this forecasted appreciation with the federal government's homebuyer credit and you are really getting a deal in Santa Rosa.

How can you buy now? One way is private money....

Private money (also known as hard money) is generally more expensive compared to the prevailing rate of interest for conventional loans. A private money lender (private investor) commonly charges above average on the interest rate due to a higher risk associated with the particular transaction.
Private investors are located in virtually every state, seeking to earn higher-than-average rates on their money. With the private money loan comes the risk that it may not be re-paid on time or at all without legal action. In the case of a real estate transaction, the private investor can ask for a deed on the property in their name and Insurance on the property, similar to what a bank would require as collateral, to help insure they do get repaid in any event of default on the loan or damage to the property. In such a case, the lender would get the property and could then sell it to reimburse their investment.

Private investors are generally willing to fund a hard money loan in return for a high interest rate. The average is currently 12% but at times does go down to 10% for certain circumstances. For example, if you wanted a private money loan of $100,000 you would pay interest of $12,000.00.

Private money rates are not dependent on the Bank Rate. These are more dependent on the real estate market and ones equity. For the past decade private money has ranged from the mid 12%-21% range. If a borrower defaults they can be charged a higher "Default Rate". This rate may go up to 25%-29% or as high as the law allows. Some private lenders collect a prepayment penalty and some do not.

Private money or hard money costs more but it's efficient for those needing quick cash or their credit scores don't qualify them for conventional loans.