We recently worked with a businessman from Louisiana. He was interested in a residential hard money loan for his primary residence. His goal was to obtain a hard money loan for 90 days so that he could reposition his mortgage. This unique strategy is common among real estate investors, and builders. Unfortunately we were not able to help him with the loan, nor were we able to find a hard money lender who would. The reasons for this was not the LTV, or the value of the collateral, as all numbers were in perfect order for a hard money loan. The problem was that the loan was requested for his primary residence. Some states require you to be a licensed mortgage lender if you lend on a primary residence. Other states require the license if you lend on any 1-4 unit properties. Neither of which were the obstacle in this situation.
The problem is plain and simple. Hard money lenders don’t like to lend on primary residences, usually for two reasons: 1) Because in the occasional event of default, foreclosing on a primary residence is near impossible for a hard money lender because it can be perceived as predatory. It could take years for a lender to take possession of the property. 2) No honest lender likes to foreclose, especially on someones home. We are not in the business of kicking people out of their own home, rather in the business to lend and profit from lending only. Hope this clears things up a bit.
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