What Do I Need To Know About Hard Money Loans?

By
Real Estate Broker/Owner with Unconventional Prosperity

What Do I Need To Know About Hard Money Loans?

 

Not everyone has heard the term “hard money loan”, yet, it’s something that some people rely on. Also known as a “private money loan,” hard money loans are short-term loans that are secured by your real estate. Private investors fund these loans rather than traditional credit unions or banks. Usually, the term of the loan will be about 1 year, but it’s possible to extend it to a longer term of up to 5 years. The monthly payments only cover the interest (or, in some cases, interest with a little principal) then at the term’s end, a lump-sum must be paid. 

 

The lender can give credit to the borrower based on their property’s value. Primarily, hard money lenders consider the value of the property as more important than the credit status of the borrower. This means that borrowers who are unable to obtain conventional financing can still get hard money loans as long as they’ve got enough equity in their homes.

 

More people these days are seeking a hard money loan in Florida, so it’s important to be well-informed about what this type of borrowing involves and how it works.

 

Types Of Property For Hard Money Lending

 

Borrowers may be able to obtain hard money loans on virtually all property types from single-family residential properties to industrial or commercial properties. Some lenders specialize in specific types of property. Most refuse to lend on an owner-occupied residential property because of the additional regulations involved. However, some will be prepared to offer money in these circumstances.

 

What Kind Of Thing Should Real Estate Investors Use A Hard Money Loan For?

 

It isn’t appropriate to use a hard money loan for everything. Whenever possible, using a traditional bank or credit union is often the best solution for borrowing. However, if you only need a short-term loan or you cannot use a traditional lender, hard money lending is a good source of finance.

 

Investors in real estate use hard money loans for numerous reasons. A primary reason is to obtain funds rapidly. Hard money loans are often funded within 7 days, much faster than the 30 or 45 days to receive a bank loan. This allows investors to buy properties with a quick close. If borrowers have previous credit issues, they may also struggle to obtain conventional lines of credit. Hard money loans can prove indispensable in such cases. They are also a useful option for fix and flip investors who are only looking for a short-term funding solution. 

 

As long as you choose a reputable lender, hard money loans are an effective way to invest in desirable properties and to profit from your own investments. The Florida real estate market remains a buoyant one for investors. The state’s population is increasing year-on-year, with another 6 million residents expected to make their home in the Sunshine State by 2030. Paired with the fact that the state is an ever-popular tourist hotspot, it’s easy to see why more people in Florida are considering hard money loans to invest in real estate.

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