Basics of hard money lending
Hard money loans are by no means an innovation. In fact, they have been around since the early 1950’s, yet, many people are not aware of the benefits of the loan, or how they can take advantage of the opportunity.
What is hard money?
In an extremely simplified manner hard money loans are: Large quantity of cash at high interest rates for people with low or no credit scores.
Hard money loans are real estate funds collateralized against the quick-sale value of the property for which the loan is made available. Private investors lend their personal capital through brokers specialized in the field. Brokers normally lend their funds in high terms. They regularly set high requirements in terms of loan to value costs. In addition, interest rates are typically higher than a conventional loan and can range from 7% to 10%.
Although the high interest rate may not be attractive, the biggest advantage of a hard money loan is that the broker is able to close a deal relatively quickly. This kind of loan becomes essential when you are under a time rush. The majority of investor loans can be done in 3 days. Other loans can typically process in roughly 14-30 days.
Who are these loans available to?
This kind of loans is mainly targeted for investor type lending, refinances, or purchase money mortgages. They are mainly popular amongst people that do not necessarily qualify for a conventional loan.
Because of the state of our economy most investors have funding issues. Individuals who may not have a large network of investors can take advantage of this service because they are able to obtain the capital they need to fund their projects. A borrower can qualify for a loan even if there are have credit issues, income issues, and sometimes when the investment property has an occupant. Typically owner occupied are not applicable for this kind of loan.
How do hard money loans work?
Hard money loans are government regulated and funded by 3rd party sources. Usually, Hard moneylenders make their part by using a point system in which the borrower pays a certain percentage of the money up front in order to create the relationship with the investor.
How to take advantage of a hard money loan?
Most people that are investing in real estate are buying homes, increasing their value, and conventionally flipping them by using the appraisal process. For the common person, correctly executed mortgage investment can be key to financial success, and a stable retirement. Most loans maximize at 75 percent of the loan value, in comparison, hard money usually will maximize at 60 percent.
Although it is risky, the benefits of investing with hard money can be far greater than a conventional loan. One principally takes advantage of the loan by working efficiently. The loan enables the borrower to complete tasks in a short amount of time, which creates time for other desired ventures.
In addition, hard moneylenders offer flexibility and might be able to help you out in case of financial troubles.