Commercial loans made with hard money are only evaluated when the borrower is sure that they have completed extensive research using other sources, such as traditional lenders and banks.
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The borrower should send their application to at least 10 of these conventional source (or employ a reputable broker to handle the file) before considering hard money. Why? Hard money is expensive. The market rate is currently 15%, with 6 points added to the face of the loan. The term is usually shorter at 12 to 36 months.
The options available to the borrower will always be more costly when compared to a hard money loan. In general, the borrower will have three choices:
1. Partner up with a friend
2. The property is lost
3. The business could be destroyed and the combination of 3 and 2
If your home is worth 50% equity and could be lost through foreclosure or. taking out a hard money commercial loan of 6%, to support you for two or three more years, the decision is easy.
However, it's a decision that the borrower must face, and accept their current situation as it is and then make the best choice according to their present options.
Incorporating a partner could be a bad idea for the person who is borrowing. Doing a rush to sign up with the new partner because they have cash could lead to legal problems, besides foreclosure.