A hard money loan is an immediate and useful solution when a traditional bank loan is out of the question. Whatever your situation, hard money loans are available to you – no need to show proof of income, and hardly any paperwork to complete. How is this possible? While banks have become more restrictive with their loans over the years, private lenders have stepped in to fill the void – now real estate investors have a flexible and comprehensive financing option when they need money fast.
The reason why a hard money loan is much easier to obtain than a traditional loan is because the loan is based on the value of the real estate property, rather than the usual lending criteria based on the borrower. Thus, the need for a credit check, bank statements, and lending history are extraneous - however, many private lenders will run a check to assess their risk, and depending on the market, ease or tighten their own lending guidelines.
Because the risk is typically higher for a hard money loan – another reason why banks have chosen to stay away – the interest rate is also higher than what a bank offering a conventional loan would offer. While this is an added expense to the borrower, the benefits of a hard money loan can be invaluable. Private lenders are much more flexible about structuring the loan terms to fit the borrower’s needs, and most importantly, your hard money loan can be in your hands in days, rather than weeks or even months.
What kind of hard money loans are available to me?
One of the major advantages of a hard money loan from a private lender is that you can quickly secure a loan for a multitude of potential real estate investments. If you are bidding on a property, rehabilitating an older property, or constructing a new property or development, hard money loans can help you get started on your investment or keep you afloat until your next financing stage.
Here are some different types of hard money loans you may come across:
- Hard money loan for purchase
- Hard money loan for refinancing
- Hard money loan for new construction
- Hard money loan for development
- Hard money loan for foreclosure
- Hard money loan for bankruptcy
Whether your real estate venture is for a commercial or residential property, there is a type of hard money loan that can fit your needs. Always begin with consulting your private lender to evaluate your financial situation and outlook and see if a hard money loan is right for you.
When is a Hard Money Loan the best option?
Hard money loans are often considered to be bridge loans, a supplemental loan that is put in place while permanent funding is still pending. This means that it is best for the short term – a period that can be a few months, or a couple of years. Any longer, and the interest rates can begin to work against you. Careful planning and a solid investment plan can help you determine if a hard money loan is to your advantage.
If you need a loan quickly, without any of the usual hassle of paperwork and red tape that seems commonplace at a bank these days, then a hard money loan is an excellent way to secure financing for your real estate investment. But always make sure that the road ahead is optimistic. A hard money loan is a convenient, effective, but temporary solution, and assessing your ability to pay back the loan at the next stage of financing can be crucial to the success of your real estate investment.
Even the most solid real estate investment can run into a difficult period. If you suddenly find yourself needing an expedient solution to an unexpected financial crisis, you don’t need to feel like it is out of your control. Hard money loans can give you back that control today.
To learn more about how a hard money loan can be to your advantage, consult Lighthouse Capital Funding. We are a private lender that specializes in providing you with a convenient and effective solution to your loan needs. Contact us to find out more.
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