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Calculating a Residential or Commercial Hard Money versus Bank Loan

Whenever a person borrows money, there are plenty of pros and cons associated to it! This is extremely true if you are a part of residential and commercial real estate industry. In this industry, you will not be able to evaluate an investment based on the property’s potential income or the borrower’s credit scores. These details will not tell you if a loan worth several thousand dollars is worth. Conversely, it is very important to take care of your financing methods. You should make sure the investment is financed properly and set to make profits in all directions.


Very Many Financing Methods!


It is quite interesting to note that there are several different types of financing methods in the market. From banks to private hard money lenders, you have numerous options to pick from. With this being said, here are few differences between commercial/residential hard money and bank loans.


Marked Differences in Rules & Regulations


All major banks provide loans for commercial and residential purpose. But, there are marked differences in their rules and regulations. When compared against residential/commercial hard money loans, banks offer lower rates of interest. This is because they compete with other banks and use interest rates to give them an edge in the market. Additionally, banks have conventional loan qualification guidelines that reduce the overall risk of the borrower. If you have all the required documents, you can spread the loans across two decades. This is a feature only traditional loans offer. However, bank loans come with a unique set of drawbacks. These loans are bound by rigid payment routines and credit rating requirements. Also, the approval process spans between 60 and 90 days! This is when hard money loans become useful.


Rewards in Choosing Private Financing


There are several rewards in opting for private financing. Commercial hard money loans don’t have any lending requirements. The policies and terms depend on the two parties involved. This is why funding is quick and easy. The entire loan approval process is simple and straightforward. Also, you don’t have to worry about any loan closure costs. If you are running short of money during a residential or a commercial project, private financing is your ultimate destination. Private lenders are here to push you forward and fund your projects. Nevertheless, the final loan to value ration depends on the equity of your project and your potential to repay.

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