So you are in need of a fast loan, have real property of value, and are not sure how to go about securing a loan. Today there are asset-based loans that can be easily acquired wherein a borrower can get the funds needed by securing the loan with real property. These types of loans are called ‘Hard Money Loans’ and are typically issued or granted by private investors, whether individuals or a group of investors.
There are many benefits of securing a Hard Money Loan once you fully understand the concept and what’s behind the loan. Many hard money lenders issue loans to borrowers based upon the value of the real property being purchased rather than on the borrower’s current assets or income. Though hard money loans are generally easy to obtain, the terms of the loans are far more restrictive than the terms of conventional or regular loans or mortgages. However, the restrictive terms of Hard Money Loans (sometimes referred to as private money loans) are understandable since the monies being loaned out are coming from private investors and individuals handing out their own money, which means that the money that is being invested is coming from everyday people and not your typical banking or lending institution.
The actual terms of a Hard Money Loan will vary from private lender to lender, but simply put the terms need to protect the personal monies of investors while affording the borrower the funds they need. Many hard money lenders make it a point to lend money based only on the real estate deal or purchase at hand and will only lend up to a specific percentage of the market value of the real estate. By engaging in these terms, lenders protect their investment in case of a borrower’s default.
Because the loan terms do vary depending upon the private investor, it is important for borrowers to fully understand the terms set out when dealing with any hard money lender before choosing the lender that best fits their individual needs. The terms, as we have mentioned, are varied. Here is a list of some of the terms that borrowers can expect to encounter.
1. Loans are typically up to 70% of the value of the property after it has been repaired.
2. Borrowers should expect higher interest rates (makes sense based upon the convenience of the loan). Typically, you see rates vary from 12%-20% with terms between 6 months and several years.
3. More often than not there will be either closing costs or other fees to be paid.
4. Points will be charged for the use of private monies ranging from two to ten points..
These are just a few of the obvious terms, but surely there can be other terms that come into play depending upon the private investor(s) and what their specific requirements may be.
When seeking out your perfect hard money lender, borrowers will typically give focus to the availability of the funds – how quickly the money will be available. This is especially important when dealing with investment properties. If the property appears to be an ideal investment property, you will need to acquire funds quickly before another buyer comes along and beats you to the buy.
In addition, borrowers want to inquire as to whether or not there are any pre-payment penalties since these can desperately affect the buyers overall profit and, should there be, perhaps it is best to avoid these lenders.
Be aware also that many hard money lenders are all about the current deal on the table and may make a trip out to physically view or inspect the property before loaning the funds. However, there are many hard money lenders today who now require credit applications, W-2 forms, tax returns and even pay stubs in their efforts to protect their money and investments. Again, this will vary from lender to lender.
If you are a beginning investor here in the Dallas area or you simply want to make a purchase quickly, then a Dallas Hard Money Lender is the right choice for you since your typical conventional loans can take more than a month to fund and making a quick purchase obviously requires quick funding. Hard Money Loans are a unique way of financing real estate since you can borrow the money needed to buy the property, repair it and then turn around and sell it for a profit. In this scenario you are able to make a profit using somebody else’s money and not your own. Creative and clever to say the least.
Dallas is home to a wide range of hard money lenders. With a little bit more of an understanding of what a Hard Money Loan is and how it works, you can start shopping around now for a Dallas Hard Money Lender that will meet your specific needs and one you can start a profitable, long-term relationship with today. It goes without saying that when you find a hard money lender in Dallas, use them successfully with only smooth transactions across the board, then you are apt to use the same private lender over and over again.