If you are a novice real estate investor, you will come across terms that are both confusing and important. One such jargon would be “Hard money loans”. It is a frequently used financing method but is little understood by players in the industry. With this being said, here is a comprehensive insight through hard money loans.
What are hard money loans?
Hard money loans are offered by private companies or individuals. These loans depend on the property you are ought to invest on! To be more precise, hard money loans are independent of your credit rating. In most cases, the loan amount is calculated as a percentage of the property’s actual value. However, hard money loans suffer a huge rate of interest. At times, the interest rates can be twice the amount charged by a regular loan. Of course, you shouldn’t forget to consider the high origination fees of hard money loans.
Who gets hard money loans?
So, who needs hard money alias bridge loans? Over the years, many house flippers and constructors opt for hard money loans. These borrowers choose hard money loans because they can borrow up to 100% the property’s actual value. You don’t have to worry about down payment or foreclosures charges at all! Nevertheless, hard money lenders will expect you to back up your loan with hard-core assets. If you are confident that you can invest on a property and convert it into a huge profit, you must go for hard money loans. Some borrowers use bridge financing methods to fix properties, increase its net worth and re-sell them! These are scenarios were a standard mortgage wouldn’t be approved.
How to get hard money loans?
Indeed, hard money loans can be obtained easily. If you know the right lenders and the actual procedure, you will be able to walk away with lots of money quickly. In most cases, funds are released in three to six days. Now, you should bear in mind that policies and requirements differ from one lender to another. You should understand the lender’s policies for a conflict-free investment. Typically, the lender will ask you to pay an interest between 15 and 20 percent. Once again, the actual rate of interest depends on the hard money lender. So, do lots of homework and handpick a lender who is both trustworthy and ready to fund your investment.