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Things You Need To Know About Hard Money Loans Investors would agree to the fact that it’s quite a challenge having to secure financing for their projects. Securing a capital is necessary for rehabbers before […]

Things You Need To Know About Hard Money Loans Investors would agree to the fact that it’s quite a challenge having to secure financing for their projects. Securing a capital is necessary for rehabbers before they can start renovating a home for rental or sale eventually, and to acquire the property, cover listing fees, and many other expenses that are necessary. Majority of these fix-and-flip investors would prioritize securing hard money loans in order for them to successfully fund their projects. The advantage of doing business with hard money lenders is that they specialize in serving fix-and-flip investors and they would usually offer them a much quicker turnaround and a lot more financing options that you can’t avail from traditional banks. Below are a few very important things that you should know when it comes to hard money loan. Higher rates and shorter terms. You can’t really expect one hard money loan lender to have the same terms as every other lender. However, you can be sure that these types of loans have quite a lot shorter terms compared to traditional bank mortgages and they have maturities that would usually range from one to three years. Lenders will be anticipating on the rehabber’s completion of renovation work as well as having been able to re-sell their properties before their loans are due and will use such proceeds to be able to pay back their loans. The loan’s structure works with the idea that while the renovation is ongoing, monthly interest payments are due and once the home is sold, principal becomes due. As mentioned earlier, hard money loans have shorter terms than conventional mortgages and it is because of this that they tend to have higher interest rates.
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One major advantage of hard money loans that conventional bank financing can’t offer is a faster access to capital. The process involved in hard money loans is quick and some lenders would even provide loan approvals on the same day. You can also expect rapid dispersion of funds usually within days of approval. Fix-and-flip investors enjoy a fast turnaround on these loans while also enjoying a distinct advantage as they compete with other buyers. Also, when it comes to hard money loans, lenders will focus mostly on the property’s value and not so much about the wealth of the borrower. There’s still a good chance for rehabbers who have proven skills and would like to finance a desirable property to qualify for a hard money loan even if they have a history of bankruptcy or they don’t have a perfect credit score. Another advantage of hard money loans is versatility. With more types of properties, you can expect hard money loans to be able to amplify your profit opportunities as investors.