These are the only benefits to obtain a hard money loan. Hard money loans are a mortgage provided by a non-traditional bank or lender. Instead, the loan is provided by an investor or private company who specializes in giving out these types of loans. These loans are easier to obtain and require proof the individual can repay. This is different from a traditional mortgage that requires a high credit score, solid employment history and good credit to debt income ratio.
Property Owners Wanting a Hard Money Loan Can Pull Interest from an Existing Property
A borrower wanting to use hard money can take equity from an existing property. They can take that money and reinvest the capital for either property renovations and/or capital for a new property. This is a great benefit for an opportunistic investor who wants to move on a new property, but do not have the capital to do it. The hard money loan acts like a bridge loan.
Obtaining a Hard Money Loan Enhances an Existing Property Purchase Offer
Hard money financing is a stronger offer for a property seller compared to a bank mortgage loan. This offer, combined with a cash from the money loan, can have a potential buyer’s attention. They may be interested in negotiating a better purchase price for the property.
This Loan is Easier to Obtain than a Bank Loan
A bank loan requires a lot of paperwork and time. A borrower wanting funding immediately can get a hard loan anywhere from five to 10 days. The time a bank loan takes is at least three weeks.
A Hard Money Loan is More Flexible than a Traditional Bank Loan
Hard money agreements are more flexible than traditional bank loan agreements. Hard money lenders don’t employ the standard underwriting process a bank or lender does. Instead, the private money lenders look at each loan application individually. Also, approval and terms depend on the situation. For example, a hard money lender can tweak terms such as repayment schedules that help the borrower make the payments.
A Hard Money Loan is a Good Idea for Fix-and-Flip Investors
An investor wanting to flip property will benefit from a hard money loan. They can obtain this short-term loan, fix the property and sell it for more money. They pay off the hard money loan and keep the rest of the money.
Getting a Hard Money Loan for a Property
Obtaining a hard money loan from a lender involves completing a loan application. This application includes property information and borrower information. The hard money will review the information and determine if the loan can be approved. Remember, the borrower’s credit is important. However, it is not as important as the property’s loan-to-value. The property will be appraised to make sure the property is valued correctly. Once this is complete, the hard money loan application continues. If approved, the individual will receive the loan within in a matter of days.