A hard money loan is a type of loan that provides immediate access to funds. It is easy to get approved. And, where needed, it can be flexibly structured.
Those real estate investors who know how hard money loans work and they have long relied on the solution, for them, it doesn’t get any better when it comes to finding a financing option for their investment projects.
But for those, who are new to the game, who have never applied for a hard-money loan before, here are few important things to know about the non-traditional loan product.
Unlike a traditional loan, a hard money loan is made available as a short-term loan. It could be 6 months, 12 months or 3 years at most (in usual cases). That being said, borrowers have the option to refinance a hard money loan into a long-term financing.
If you have a good business plan, a solid exit strategy and a collateral to serve as a security, you are a strong candidate to apply for a hard money loan.
You don’t have to have a formidable credit history. You don’t need to be an experienced investor.
One of the biggest advantages of hard money loans is they can be made available in a quick turnaround time. You don’t find this convenience with conventional financing options. This could be helpful in cases, where you want to invest in a fixer upper, with many potential suitors hovering around to make an offer.
You can use hard money loans for investing in different types of properties. Commercial, industrial or residential – they offer you the convenience to diversify your investment portfolio. Not only can you get a hard money loan for acquisition, construction or land development but using the loan, you can also opt for property repairs.
With so many benefits on offer, there is bound to be a catch and that comes with high interest rates. Hard money loans entail higher interest rates than conventional loan products. This is understandable for the high risk the hard money lender has to carry when approving a loan request.
The amount of loan that you can apply for depends on the value of the real estate property. In most cases, you can borrow between 60-75% of the property value.
How the value of property is established?
Usually, an appraisal will be conducted to establish the value of the property.
If you are looking for a financing option that provides you with quick access to investment capital, provides you with flexibility in terms of payment, is easy to acquire then hard money loans are near to ideal option for you.
And while we are at the subject of hard money loans, check out this helpful post that explains how to find hard money lender that is right for you.
We wish you good luck in all your future endeavors.