Investors would agree to the fact that it’s quite a challenge having to secure financing for their projects. Rehabbers will have to secure the necessary capital before they can begin renovation of any building that may be put on sale or rental later, and this is done to acquire the property, pay the contractors involved, and many other expenses. Majority of these fix-and-flip investors would prioritize securing hard money loans in order for them to successfully fund their projects. Hard money lenders are known to be specialized in catering fix-and-flip community and would offer a turnaround that is much quicker and more financing options compared to traditional banks. Below are important things you may want to keep in mind when it comes to hard money loans.
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 would expect rehabbers to have their renovations done and that they should have resold properties before due of their loans and will use the sale proceeds to be able to settle their loans. The loans work in a way that monthly interest payments will be secured during renovation and once the home is sold, principal will then become due. Because hard money loans come in shorter terms, you can expect it to have higher interest rates compared to conventional mortgages.
A Quick Overlook of Loans – Your Cheatsheet
3 Lenders Tips from Someone With Experience
One major advantage of hard money loans that conventional bank financing can’t offer is a faster access to capital. Hard money loans can be processed really quick, with some lenders capable of providing you same day loan approvals. Generally, they disperse funds rapidly within days of approval. The fix-and-flip investors are enjoying a distinct advantage on the fast turnarounds on the loans in terms of competition with other buyers for properties. 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.
You can also enjoy the versatility of hard money loan. With more types of properties, you can expect hard money loans to be able to amplify your profit opportunities as investors.