A hard money loan is a specific type of asset-based loan financing through which a borrower receives funds secured by real estate property. Hard money loans are fastest financing tool for real estate investors to quickly acquire the capital needed to purchase, refinance or renovate a property.
Here are 10 benefits of hard money loans for real estate investors:
1. Quick approval and funding
It’s one of the biggest advantages of using a hard money loan. The hard money loans for real estate application process is simple. Generally, hard money lenders consider the property, the borrower’s experience, the exit strategy for the property and cash reserves in order to make the monthly loan payments. As long as everything seems reasonable in these areas approval will most likely granted. In many cases the approval for the hard money loan can take place in just one day and can be funded with 3-5 days.
2. Flexible Term Structure
Traditional lenders are not as flexible and typically take a one-size-fits-all approach to all requests. They often very rigid and have very strict rules and regulations that can prevent you from getting your loan approved. Although hard money lenders also have regulations, they aren’t as strict.
3. A perfect credit score isn’t necessary
You bank will require a perfect credit score and an income history before approving your loan. If you have a poor credit score, or you don’t meet the bank’s criteria, your loan request won’t be approved. Hard money lenders don’t require all these formalities. They focus on the value of the property and down payment the borrower has invested. The hard money loans for real estate will approve if they are comfortable with the equity and valuation.
4. Hard money loans can approve even when you have issues on record
If you have issues such as bankruptcy or foreclosures on your record, traditional banks may prevent your bank from financing you. However, hard money loans for real estate lenders will focus on your equity and not past records.
5. Hard money loans help to make your offer stronger
When you make an offer with a hard money loan, your offer will appear stronger, especially if there are several interested investors with bank loans. Banks are known for pulling financing from buyers during escrow and killing the deal.
6. You can close the deal quickly at lower price with hard money loans
With hard money loans, you are able to haggle and get a lower purchasing price and a promise for a shorter escrow period and closing..
7. You can use leverage to invest more
Purchasing properties with cash has several benefits including purchasing properties at auctions. However, because paying cash can limit the number of your investments, you can use hard money loans for real estate and get up to 75% financing. You will have money to secure properties and retain more to complete your other projects.
8. Reinvest equity from your property to a new property
When an opportunity arises, you will have limited time to act. If you are raising money to make a down payment or to purchase the property, you will have few options; for instance, cash-out refinance hard money loans real estate. You can qualify for such a loan in case you have enough equity in your property.
9. More capital and financing options available with hard money loans
Most banks will only offer loans to a single borrower up to four times. However, hard money financiers don’t have such limitations. Their main concern is only your equity in the property.
10. No Prepayment Penalties with hard money loans
Banks often charge hefty prepayment penalties if circumstances change and a loan is fully or partially repaid before the due date. Private hard money lenders are fully invested in your success and typically structure loans without prepayment penalties or added fees. It’s one more way a private lender can contribute to your success.
The Bottom Line:
Hard money loans are valuable tools that investors of all types and experience levels can use to leverage the purchase and rehab of investment and commercial properties. Private lenders can fund quickly, within a flexible structure and without prepayment penalties that can unintentionally hinder the success of your business. Hard money lenders can offer benefits that many conventional and traditional lenders cannot.
If you want to know whether or not a hard money loan is a good solution for your particular investment, please feel free to contact Magna Capital Group, Inc. today at (310) 734 4044 or Email at email@example.com.