Hard money private money, is exactly that: non-institutional money that can be borrowed, usually from an individual or an extremely small lending company. They are an alternative to a bank or traditional mortgage lender, and their loans are typically much different.
- Hard money lenders are expensive. They typically charge interest rates in the teens, and charge at least 2-3 points and sometimes as many as 7-8. Clearly, this is not a loan for Joe Homeowner.
- They typically lend for very short terms. This could be anywhere from a few months to a few years, but seldom longer.
- They lend at extremely low loan-to-value ratios (LTVs), meaning that they will only lend a small fraction of the value of a property. If the real estate appraises for $100,000, they might only lend $60,000.
Hard money lender real estate is one financing option borrowers with poor credit can utilize to purchase a home. Hard money loans are substantially more expensive than conventional home mortgage loans. This finance option should only be used on a short-term basis to help borrowers establish or rebuild their credit history.
Hard money lenders can be a useful resource for the wise real estate investor, but all investors should take a good look at their local banks first, as some local banks can offer the same speed, flexibility and quality of service as a hard money lender at a fraction of the price. Real estate investors are wise to try to establish a relationship with both a local bank and a local hard money lender to keep their options open and to find the best fit for each real estate deal that they make.
Real investors need financing, and hard money lending is one way to go. Here are some benefits of hard money lending that are certainly hard to ignore.
· Hard money lenders support your venture in real estate investing. The basis for approval of a hard money loan depends on the deal and not the borrower’s credit score. Banks will not help you fund your rehabbing or flipping houses business even if you are qualified for a loan.
· Repair costs are financed by hard money lenders.
· Since hard money lenders are investors like you, discussing matters on real estate is easier. They know the ins and outs of the industry and you will not have a hard time negotiating with them.
· You can flip and rehab a house without spending a single cent from your savings. Why so? Banks often require a 20% down payment for a loan, while hard money lenders don’t. * It only takes days to approve a hard money loan, unlike banks that take months to approve a loan proposal. These advantages are things a smart real estate investor shouldn’t ignore. It’s everything you need – a fast and easy access to finance your business.