A hard money loan, for the uninitiated, is often seen as a bridge loan, especially for real estate deals. The terms and conditions related to a hard money loan is related to the asset itself, and not on the borrower. In fact, there are lenders who will consider applicants for hard money loans, even if they don’t have a great credit score or lack enough documentation/tax returns to prove their income or earnings. It is possible to get as much as $10 million through a hard money loan, and here are some of the other aspects that matter.
The need for hard money loan
Most often, hard money loans are used for real estate investing and financing. Banks can often take a considerable period of time before approving real estate loans, and many investors and borrowers don’t have all the time to wait. This is precisely why hard money loans are called ‘last resort’ loans. When you want to buy a distressed property or need money to refinance or renovate a property that’s not generating any income, hard money loans can be handy. It is also an option for quick property flip, but one can also consider fix and flip loan for similar needs.
In many situations, this loan is great for those who want to stabilize the real estate investment. For example, if the property is not viable for a bank loan, a hard money loan can offer the money required to get renovation done, following which the investor can consider traditional loans. Since the lenders of such loans take considerable risk, they often charge a higher rate of interest.
Hard money loans are also great for borrowers with a low or poor credit score. Lenders are more interested in the value of the property, and therefore, for owners who are facing foreclosure on the property can consider this option.
Decoding the pros and cons of hard money loans
As long as the lender is interested in the property, hard money loans are easy to get. Often, it takes just seven days to get the money, which is a big advantage for certain situations. Secondly, the owner or his/her credit score doesn’t really matter, and more importantly, many lenders will consider borrowers who don’t have tax returns to verify their income. The process is quick, and it can be really handy when you are expecting a bank loan but may have to wait for it.
On the flip side, hard money loans are expensive, and that’s probably the only aspect that you need to worry about. If you are sure of making money through financing your real estate investment, this is still a great choice.
Well, hard money loans are extremely useful for borrowers and real estate investors. The minimum amount you can borrow is $75,000, and the term can be anywhere between 6 months and 36 months. Some lenders may tweak repayment schedules on request, and we recommend that you check these aspects before taking a call.
Author Bio – David DiNatale is a Forbes Real Estate Counsel member, licensed attorney, mortgage loan originator, and Managing Member of Capital Funding Financial.