3 Benefits of Purchasing Property Through Hard Money Lenders
If you are having financial troubles, you might want to know more about different types of loans. Some people might be interested in learning about hard money loans. A hard money loan is a very specific type of loan that is asset-based. The financing is done by a borrower who is receiving funds that happen to be secured by real property. These types of loans are typically going to be issued by companies or private investors. Most of the time, the interest rates for a hard money loan are going to be higher than those for conventional or residential property loans because of the shorter duration and higher risk that is associated with the hard money loan.
There are many things that you might want when it comes to hard money loans. You might want to find hard money lenders or be interested in a hard money business line of credit. You might also be concerning yourself with hard money closing costs or different types of hard money deals. There are many things that are worth learning about hard money loans, and you can learn them by talking to the appropriate professionals in the field who can help.
Whether you?re looking to purchase a house or are in the process of renovating a home to sell, there are many instances when traditional bank loans don?t work out the way you?d expect them to. That?s when it comes time to start looking into other loan options, such as private hard money lenders.
Hard money lenders specialize in providing a variety of equity-based, hard money loans to each of their clients. To give you an idea of what these types of loans look like, here are a few examples:
- Investment Property Purchase: A property that?s purchased for investment purposes only, such as renting it out to obtain additional cash flow.
- Rehab Fix and Flip Loans: A short-term, hard money loan that provides the finances necessary to renovate and transform the property, allowing it to be sold for a higher price.
- Residential and Commercial Properties: A loan that is based primarily on the borrower?s assets and provided for the purchase of a residential or commercial property.
Now, you would think that there would be a catch when it comes time to qualify for the loan, right? Actually, there isn?t. Investors usually require only 30%-50% equity on the property to ensure their protection and a valid reason for needing the loan. That?s it. Keep in mind, though, that while hard money loans are easy to obtain, they do come with higher interest rates, starting at about 15%.
So, why should you pursue a hard money loan for future property purchases? Read on to discover the top benefits that come with working alongside a private hard money lender:
- Fast Renovations: For those who are interested in completely flipping houses and fixing them up to sell, hard money lenders are usually the best place to go. With their quick turnaround rates of less than two weeks, you?ll soon be well on your way to selling the house for profit.
- Shorter Payment Period: Traditional bank loans can usually take anywhere from one to 20 years to pay off. That?s not something you?ll have to worry about with hard money loans. A private hard money lender has a limit of five years for the duration of their payment periods and will work with you to determine the appropriate amount to pay within that time frame.
- Lower Down Payments: Borrowers who obtain a hard money loan have the opportunity to finance the project with the money they?ve received from the loan. This means that they only have to put down about 10% on the property rather than the 20-25% that?s required with a traditional bank loan.
What?s your experience with hard money loans? Do you have any tips you?d like to share with first-time borrowers? Share in the comments below!
