The 3 advantages of buying real estate with hard money loans
Using a conventional loan when investing in real estate may not be the best option for you every time. Yes, conventional loans have supported many types of real estate investments, but getting a conventional home loan can be very difficult. There are many criteria that investors must meet in order for a traditional lending institution to grant them loans.
So, does this mean that lenders who do not qualify for a traditional loan should refrain from investing in the real estate market? Not at all. In fact, many investors don’t even rely on conventional loans to support their investments.
But what do investors do when they need quick financing at affordable rates? The answer is hard money loans.
What are hard money loans?
Hard money loans are investment real estate loans made by individual investors and companies that lend money to investors, such as Loans on assets. The purchased asset is often used as collateral, reducing risk for both lender and creditor.
Hard money loans are great for quick home financing where investors buy dilapidated homes, renovate them, and then sell them for a profit.
Hard money loans are mostly short term loans, and they often last between 1 and 3 years because their interest rates are often higher than traditional financing options like mortgages.
If you think you need a hard money loan, here are three important benefits you can expect.
1. Fast processing times
On average, traditional lenders take around 28 days to process a loan. This time is too long for real estate investors, especially in an industry with so many players and where property values fluctuate every week.
During those 30 days, an investor could get a hard money loan, buy the property, and start renovations so they can sell the place and refinance the loan they originally took out. As such, hard money loans have become a very attractive alternative to bank loans.
2. High chance of approval
One of the most important challenges facing real estate investors today is the approval of a loan from traditional lenders like banks and government agencies. These lenders often take the applicant’s credit status and annual income into account when deciding whether to grant the loan.
In some cases, the bank does not provide the full loan amount, leaving the lender with little choice but to seek another financier.
However, hard money lenders do not consider an investor’s credit or income. Although they keep the property as collateral, the main requirement is that the loan amount is equal to the value of the property purchased.
3. More flexible payment terms
Since private lenders offer hard money loans, you have more room to negotiate long terms. You can even customize the repayment plan to suit your financial situation. status. This makes hard money loans very convenient, especially for someone new to the business.
The bottom line
As an investor, you might have limited options with very little time to access the financing you need to buy a property. A hard money loan can be an ideal choice as it does not come with any of the paperwork associated with bank financing.
If you get a hard money lender, try to avoid making a hasty decision. Make sure you evaluate their terms, fees, and interest rates so you can make a wise choice.
Brad Bernanke story