A.D. Cantelmo Property Management
Our Business is Property Management in Orange County California
Alternative Financing
Alternative financing
offers a way for lenders and borrowers to respond to the realities of today’s
economy. In real estate transactions, traditional financing may not
always be sufficient to complete a purchase; therefore, a borrower may opt for
a nontraditional mortgage product. A borrower may not qualify for
financing based on the lender’s criteria, or the terms of the proposed
financing are not favorable to the buyer. The changing needs of consumers
have created an environment in which alternative financing is sometimes a
necessity.
In my business of Property Management in Orange County California, I have found it unusual for home buyers to use Alternative financing.
A borrower can seek
alternative financing from a variety of sources in order to complete a real
estate purchase. Alternative financing methods include seller financing,
secondary financing, and other financing alternatives that are based on the
type of property or the purpose of the loan.
A common source for alternative financing
is the seller. If the seller is going to be the lender, he or she agrees
to provide the funds to the buyer for the amount required to close a real
estate transaction. The funds are usually in the form of a loan that is
secured by a trust deed in favor of the seller and recorded after the first
trust deed. When a seller carries the paper on the sale of his or her
home, it is also called a purchase-money loan, which is similar to the
loan made by an outside lender. In a seller carry back loan, the seller
acts as the beneficiary and the buyer is the trustor. Seller financing
offers distinct advantages for both the buyer and seller when compared to
traditional financing.
A hard money loan is any loan used to take cash out of a
property. Hard money loans are typically offered by private investors who
are seeking to earn a higher return on their investment through the interest
rates on the loan. These types of loans are beneficial when traditional
bank financing is inadequate to complete a real estate transaction.
When
a private lender extends credit to a borrower for a hard money loan, the
property itself serves as collateral for the loan. If a borrower defaults
on a hard money loan by a private lender, the lender can potentially take title
to the property through foreclosure and obtain the property for significantly
less than the original investment. The private
investor is also concerned with obtaining a reasonable return on his or her
investment. This can be accomplished through the interest rates offered
by the private lender. As a result, the interest rates on hard money
loans from a private lender are typically higher than market rates.
States establish usury laws to set a ceiling on how high the private lender can
set the interest rates
A.D. Cantelmo Property
Management Specializes in Property Management
in Orange County Ca.