Need a real estate loan? That is typically the case for all new and experienced investors who are involved in a real estate venture. No matter what your level of investment ability, a real estate loan is a sound way to finance the purchase of an existing property, construction of a new property, development, and the majority of potential real estate projects one can undertake.

A real estate loan can come in two basic forms, one from a lending institution such as a bank, the other from a private lender. Each has its clear advantages and features to consider; interest rates, length of loan, loan structure, and restrictions are all valid points that can help you decide on the type of loan you require. Ultimately, however, the difference comes down to a key element – flexibility to meet your needs.

The Bank

A real estate loan from a bank, most commonly referred to as a mortgage loan - is the most common real estate loan available – it’s what virtually every homebuyer in the country is currently shouldering during these tough economic times. A standard real estate loan is based on the cost of a property minus the down payment. This amount, know as the Principal, also includes many fees and closing costs that include everything from inspections to documentation. A standard loan term can last about thirty years and currently carry a national average of 6% to 7% interest rate (depending on the type of loan), and the failure to pay the interest can result in foreclosure and the loss of the property.

While the advantage of a long-term loan can be debated these days, a conventional real estate loan from a bank is also riddled with limitations, stemming from a complex set of guidelines and restrictions that have been refined over the years. In preparation for a real estate loan, an investor will have to prepare a bevy of documents including their credit status, tax returns, and proof of income, among others. Even with all the proper documentation in order, the waiting period for the loan approval can take several weeks.

The Private Lender

So what about a private lender? The advantage of a real estate loan from a private lender, known as a hard money loan, is very specific to a certain type of investor need. Real estate investors who encounter a situation when the timeline and restrictions of a standard real estate loan from a bank are not advantageous to them will consider a hard money real estate loan. This kind of real estate loan is similar to a mortgage loan in the sense that both require the property itself as collateral, but the similarities end there. Unlike a mortgage, a hard money real estate loan has a primary focus on the property.

A typical private real estate loan will be structured for the short term, from several months to a scant few years. On top of that, the interest rate will hover up to 20% for some loans – this is the price to pay for what is almost a guaranteed loan for your property whenever you need it. A borrower can use a hard money loan for everything from acquisitions to construction, and things that banks stay away from, like bridging and foreclosures. And with little paperwork required, a real estate loan from a private lender will also be approved and available to the borrower in just a few days, making it one of the most convenient loans out there.

The best real estate loans are borrower-specific. Before researching further how a loan can benefit your real estate investment, make sure to assess your needs first. No matter what your situation now, you may find yourself needing to explore all the options available to you. If you are in need of a flexible, short-term financing solution, consider a private lender that can provide a hard money real estate loan.

To find out more about real estate loans and whether a hard money loan is right for you, consult Lighthouse Capital Funding. We are a private lender that specializes in providing you with a convenient and effective solution to your hard money needs. Contact us today.