A hard money loan is a short-term financing option used to fund the purchase of an investment property. This type of loan is often a financial tool for house flippers or real estate investors whose goal is to renovate or develop a property, then sell it for a profit. Hard money loans offer huge benefits that are not typically available through traditional lenders such as banks and other financial institutions.
Here are top 6 advantages of using hard money loans to fund your real estate deals:
1. Simple, Easy And Quick Loan Process:
The application process for a hard money loan generally takes less time for you to be approved for the loan, which allows you to use your loan money quicker. This time-saving process can allow you to act on more opportunities and even gain an edge on the competition through speed and execution. The simplicity and straightforwardness of a hard money loan has made it a popular choice for all kinds of real estate investors.
2. Minimum Loan Conditions:
In order to obtain hard money loans, a borrower needs to satisfy a short list of criteria whereas a bank has many hard-set requirements, like income history, experience, etc. that need to be met. The entire process of bank loans can become drawn out and the borrower, ultimately, may not even be approved in the end. On the other hand, hard money loans are fairly simple and straightforward. If the hard money lender assesses that a borrower’s target real estate investment is an excellent value and the borrower has at least 20% equity to put into the deal, it is likely that the investor will qualify.
3. Quick Approvals And Rapid Funding of Loans:
Loan approval for hard money loans is far quicker than traditional banks or financial institutions. Traditional loans are based somewhat on your credit, it could take 1 to 3 months to secure a traditional mortgage whereas hard money loans are typically based on the value of your investment property. Since the property is the asset that is backing the loan, hard money lenders are only interested in how much value they see in the property. Depending on your lender, you could obtain hard money loans in a few days or a few weeks.
4. Flexible Term Structure:
Banks are not flexible and typically take a one-size-fits-all approach to all loan requests whereas private hard money lenders can structure repayment and collateral release terms in ways that are mutually beneficial to both borrower and lender. Greater flexibility often results in better outcomes.
5. Works With Bad Credit History:
In order to obtain traditional loans, you should have a decent credit history to meet the bank’s criterion. If you have negative items in your credit reports, the process takes even longer and you might not ever get approved for traditional loans. In the case of hard money lenders, credit history does not matter. They lend based on collateral securing the loan, and they are less concerned about your ability to repay. For hard money lenders, the value of the collateral is more important than your financial position.
6. Zero Prepayment Penalties:
It’s another significant advantage of hard money loans is the absence of prepayment penalties. Traditional financial institutions often charge hefty prepayment penalties if circumstances change and a loan is fully or partially repaid before the due date. You can avoid these fees by opting for hard money loans. Private hard money lenders are fully invested in your success and typically structure loans without prepayment penalties or added fees.
The Bottom Line:
Hard money loans are very beneficial for those who need quick financial solutions and either cannot wait for or do not qualify for conventional banking approvals. You can utilize hard money loans in order to grow your financial portfolio in short-time. Hard Money lenders can fund quickly, within a flexible structure and without prepayment penalties that can unintentionally hinder the success of your business.
If you are trying to get a hard money loan to grow your real estate business, contact one of the most trusted hard money lenders today called Magna Capital Group, Inc. We provide residential and commercial real estate hard money loans at competitive rates. We have helped hundreds of California investors get the real estate capital they need. We are a quick, simple bank financing alternative. For information about our hard money loan programs, Call us today at (310) 734 4044 or email at email@example.com.