Hard Money Lenders Colorado: 5 questions to find the right lender
Before discussing how to find the appropriate hard money lender in Colorado, it is important to define hard money. What is a Colorado Hard Money loan and how do you find the appropriate hard money lender? Hard Money is any “hard asset backed loan”. A hard asset can be inventory, real estate, equipment, etc… For the sake of this article I am going to focus on hard money real estate loans since that is what Fairview specializes in.
Below are five questions to ask any hard money lenders in Colorado before proceeding with a loan:
1) Are you a direct lender that actually lends your own money? There are many unscrupulous players in the industry claiming they are a principle when they actually don’t lend their own funds. This creates issues for the borrower since frequently the terms change, timelines change, etc… since the borrower is not working directly with the funding source. Fortunately Fairview is a direct lender that holds and services all of its own loans
2) Are there upfront fees? Many times borrowers are required to pay large “upfront fees” for the lender to decide if they want to do the loan or not. Since we actually lend our own funds, we underwrite everything in house and never charge a fee upfront to decide if we want to loan on a transaction or not.
3) How big is your portfolio? There are a number of lenders that have a very small portfolio that they selectively lend. Size is important in lending. Let’s say a borrower takes out a loan of 250,000 from a small lender that has about a million dollars in their portfolio. Assume hypothetically there is a late payment for some reason on the 250k loan that comprises 25% of their portfolio. This is a big hit to the lender in terms of income and more than likely the small lender is going to be very aggressive in trying to collect this amount. On the flip side take a lender that has a 50m portfolio, this 250k is less than 1% of the portfolio and they are less likely to panic over a single missed payment. The lender size is important. When looking at a lender select a lender that is small enough to be personable and understand your market, but not so small that one missed payment is an absolute crisis. Fairview fits the bill with an office in Evergreen, Colorado; we are big enough to handle your loan needs
4) What is the loan term? The vast majority of hard money lenders write loans with terms under a year (most are 6 months). Although 6 months might be long enough in certain situations, in many cases a loan term this short can get the borrower into trouble quickly. Let’s say a borrower buys a house as an investment; she beings to remodel the house and finds out that there was a major foundation issue that will take longer than anticipated to rectify, the 6 months comes up and the hard money lender calls the note and puts the loan into default. This short term note puts the borrower in a very precarious situation. In Colorado, we structure all of our loans 2 years or greater so the borrower has plenty of flexibility. We have done loans as long as 10 years with an amortization schedule. Look for a lender that allows you flexibility if things do go as planned and you keep the loan for longer than anticipated.
5) Is there a prepayment penalty? Many lenders charge prepayment/exit fees on their loans. This is an extra fee for a borrower that they need to factor into the total cost of the loan. Fortunately for our Colorado Hard money loans, we do not charge a prepayment penalty on our loans. We provide longer term loans without a prepayment penalty to give borrowers ample options to maximize their profit on an investment property (either residential or commercial)
The preceding five tips should help borrowers weed through the various hard money lenders in Colorado to find the appropriate partner for their particular borrowing needs throughout Colorado. Contact Fairview lending for all your hard money needs both in Denver and throughout Colorado.
For More information on Colorado Hard Money Lenders: https://www.coloradohardmoney.com/