Why Getting Personal Loans Online Means Less Costly Financing? Hard money loan is a short-term loan secured by an asset and mostly real estate. They are provided by private investors as opposed to the conventional loans extended by banks or credit unions. They are also extended for a shorter period of time, usually 12 months. However, it is also possible to find a lender that can agree to 24 months and up to 5 years. With a hard money loan, you make monthly payments of the interest charged to your loan only. How to handle a situation when you urgently need cash today. You can choose to pay interest and a small amount of principal. The main payment is done at the end of the lending period.
In the past, the term hard money lenders sparked a mix of not so good emotions for many people. There are a bunch of lenders that capitalized on lending on real-estate with the predatory intention of foreclosing on the properties. This dealt a huge blow to the hard money loan industry. These lenders provided very risky loans to borrowers so that they can foreclose on the property later. The good news is that these lenders no longer exist in the market. Although the stigma remains, you will still find very reputable and reliable hard money in Utah.
Hard money Utah remains to be one of the fastest ways of getting money especially if an emergency knocks when you have bad credit. We all know how draining it can be to get loans through formal procedures such as banks and credit union. Hard money remains a convenient and faster way of getting a loan.
What Properties and Deals Are Ideal for Hard Money Loans?
The value of your property is the most important thing to the hard money lender. Rarely will they go into the details of your credit score, although it is still important to them. If you want to get hard money loan, first ensure that the property in question is yours and it is clean. .
Remember there are situations when hard money is uncalled for. To be honest, hard money is not suitable for all deals. If you are buying a primary residence and you have good credit and income history without any issues of foreclosure or short sale, then go for conventional financing. If you can be patient with lengthy bank approvals and checks, this could still work better for you. Hard money works best as a financing option when banks are not an option for you or when the need for the loan is urgent and must be raised within a short time. Hard money is best for fix and flips, land loans, construction loans, when the buyer has credit complications or where a real estate investor needs to act fast.
How Much Does Hard Money Cost?
Interest rates charged by hard money lenders vary from lender to lender and from region to region. For instance, hard money lenders in California are known to give the lowest rates in the country. The state has many hard money lenders and so competition for customers makes it more affordable than most states.
Hard money lending is riskier than conventional bank loans because most borrowers have either bad credit or are seeking to invest in risky projects. Higher risk means that the lender must charge high-interest rates. The rates vary from 10 to 15% depending on the location of the lender as well as perceived risk of the borrower. Points for hard money loans can range from 2 to 4% of the amount extended as loan. The points and the interest rates are significantly determined by the loan to value ratio.
What Properties Are Acceptable for Hard Money?
Each lender has specialized in their own niche. Of course, most lenders stay away from owner-occupied residential properties after the strict regulations under Dodd-Frank. But there are those willing to take the risk. When reaching out for the loan, be sure to ask the potential lender early enough what they specialize in. It could be land loans or residential or any other niche the lender is comfortable with. Almost all hard money lenders do 1st position and only very few will consider 2nd position due to the high-risk level of the lender.
Who Should Ask for a Hard Money Loan?
Hard money loans are attractive to real estate investors because of the quick funding. Most hard money loans will take about a week to be processed. This is up against 30 to 45 days taken by conventional banks to avail funds. You will only need two to three days to apply for hard money loan and the loan can get approved and disbursed within the same week. Real estate investors consider it most ideal when competition and bids are high and they need to close the deal as soon as possible.
Another set of borrowers are those with bad credit and have been denied financing by banks and other conventional lenders. Hard money lenders are not strict with income history or work terms of the borrower. They lend based on ability to repay based on the equity of the invested property.
Pros and Cons of Hard Money Loans
The pros of using hard money loans include speed, flexibility and approval. Hard money is approved quickly as long as your documents are in good order. When you build a relationship with the lender, it becomes even easier. Speed is everything when responding to market demand. The terms of lending can also be flexible. If you talk to the lender he or she can adjust your repayment period or terms of lending. This is not possible with conventional funding. All you need for hard money is your collateral. However, on the flip side the loans are costly to the borrower.
If you are looking for hard money consider knowing the rate around your area. Pass through different lenders to see what they have to offer and rates, and then make a decision.