In an ideal world, 100 percent of fix-and-flip projects would run smoothly from start to finish with the flipper enjoying a large profit at the end of the project. However, that is not reality. It is quite common for unexpected issues to arise during a flip project that leads to an investor becoming overextended. If you find yourself in this situation, it is important tounderstand the ramifications if you cannot make, or are late in making, your hard money loan payments.
- Late Payment Provision
There is typically provision in your hard money loan documents addressing the impact of a late payment. With a private loan, it is possible you may give the lender the right to foreclose and sell your property in the event you default on the hard money loan. If that statement strikes fear in your heart, remember that a reputable hard money lender in Los Angeles is not a loan shark looking to fleece you and foreclose on your property. They want you to succeed and have you become a potential long-term partner for future real estate projects.
In the lending world, the term “late” has a few different implications, each of which have different ramifications. A respected hard money lender in Los Angeles will typically provide you with a grace period during which your “late” payment will not incur an actual late fee. For example, some lenders offer a grace period of around ten days. Before signing on the dotted line, make sure to ask your Los Angeles hard money lender if they offer a grace period, and the amount of days. If the grace period has lapsed and your hard money loan enters “past due” status, your lender will typically charge a late fee that is a specific percentage of your missed payment.
In many instances, if you send in a partial payment, the lender will be open to accepting it. However, a partial payment does not mean your loan will be current and any partial payment you make will not prevent the lender from being able to escalate your hard money loan from “past due” status to “in default.”
Loan in Default
It is in your best interest to always communicate with your hard money lender and provide details on your plan to bring your loan current. For example, if you signed a contract with a buyer on your flipped property and are waiting to close escrow, let your hard money lender know as soon as possible. Or, if you are expecting funds from another source to pay your account in full, let your lender know when those funds are expected to arrive in your account. The takeaway is to be transparent with your lender.
Have Questions About Hard Money Loans in Los Angeles? Contact PB Financial Group Today
PB Financial Group is a premier direct hard money, private money and bridge lender, who has been providing quick funding since 2006 and have funded over 2700 hard money/private money loans. Our objective is to work to satisfy your financing needs on important real estate projects throughout California in an efficient and effective manner. To schedule a consultation or for further information please contact PB Financial Group at 877.700.3707 or visit www.CalHardMoney.com to learn more.
PB Financial NMLS #357614/DRE #01522495