If I lend someone money to buy a house for remodeling and reselling with the property as collateral, is that a commercial loan or a mortgage loan?

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If I lend someone money to buy a house for remodeling and reselling with the property as collateral, is that a commercial loan or a mortgage loan?

I will be making loans through my private investment firm. I have already been advised that the firm itself does not need to be licensed or registered. I have 2 questions: 1) will I need a mortgage broker to prepare and sign the loan/collateral documents; 2) do my loans have to be for a minimum period of 2 years to conform to current NV law? I know there is at least one other hard-money lender doing this type of lending for a 6-month term. They claim that their loans are considered commercial, not mortgage loans. Is that correct?

Asked on January 3, 2012 under Real Estate Law, Nevada

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Good question. If the interest rate charged for the loans secured by real property exceeds the usury laws in effect in your state, most likely the loan will need to be brokered by a licensed real estate broker to get out of the usury law requirements under your state's laws.

As such, I recommend that you have a licensed mortgage broker handle the loan that you want to do drawing up all required paper work so that you will not be in violation of any usury law requirements in your state.

As to whether your loan period can be less than 2 years, I suggest that you consult with an attorney who practices lending law in your state. My understanding is that the loan can be less than 2 years.

Whether or not the loan you plan on making is considered commercial versus a mortgage loan in your state depends upon how these two terms are defined under the applicable law in Nevada for loan purposes and how the definition applies to whether the home being remodelled is a rental or not.

 


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