Real estate is perhaps the only thing that has forever kept
its potential for profitability. Even during the recession of 2008, many made
great profits through real estate. However, most people require loans like hard money loans in Dallas
to be able to afford real estate investment. As such, investors will find this
article quite useful – as it explains in detail the two most popular types of
real estate loans.
What is a Real Estate Loan
Real estate loans a financial assistance programs designed
to bridge the gap between the borrower’s funds and the property’s cost. Due to
their frequency of use, real estate loans are often governed by substantial
governmental acts that regulate their terms and distribution.
Commonly Used Real Estate Loans
There are many types of real estate loans with varying terms
and conditions. While different financial institutes may have their designs of
loans, the most common types of real estate loans are as follows:
Mortgages
Asset-based and long-termed mortgages are the most popular
among real estate loans, even more than hard money loans in Dallas.
Terms
·
The mortgage value is secured as a percentage of
the property’s appraisal value.
·
The terms and approval of a mortgage are
dependent upon the applicant’s credit score and debt history.
·
Generally, mortgage loans are offered in two
varieties: fixed rate (fixed interest) and variable rate (changeable interest).
·
Depending on the particulars of the case, a
mortgage may cover anywhere from 70 to 90 percent of the property’s cost.
·
The average total interest of a mortgage loan
ranges from 8 to 15 percent over 20 to 30 years.
Pros and Cons
Conventional fixed-rate mortgages are a brilliant choice for
anyone looking to either purchase or renovate a home. They’re cheap, have low-interest
rates, cover most of the property’s cost, and have long repayment periods.
However, such mortgages may not be a sensible choice for investors as applications
take a lot of time to get reviewed. As for variable-rate mortgages, although
more accessible, they’re risky on account of their dependence on the economy.
Hard Money Loans
Hard money loans are an unconventional form of real estate
loans designed specifically for investors and people with low credit scores.
Terms
·
The loan is secured against the property’s
appraisal value over the loan period.
·
The governmental interference in the loaning
terms and distribution is almost negligible.
·
The overall terms and approval of hard money
loans are dependent on the applicant’s credit score, but to a far lesser extent
than mortgages.
·
The loaning period and interest rate of a
typical hard money loan are about 2 to 3 years and 15 to 25 percent.
·
From reviewing the application to the loan
payout, the entire process takes at most 1 to 2 weeks.
Pros and Cons
Compared to mortgages, hard money loans seem downright
idiotic; however, that’s not the case. Hard money loans aren’t designed for people
looking for a primary residence; they’re designed for investors looking for
quick and easily accessible funds. For example, many house flippers prefer hard
money loans in Dallas rather than mortgages to fund their time-sensitive and market-competitive
ventures.
Conclusion
In summary, real estate loans are an excellent choice for a
person to effectively increase the land acquisition power of their funds.
However, it’s recommended that before signing under that dotted line, borrowers
carefully read the terms and conditions of the loan. Furthermore, it’s also
recommended to consult a professional on what type of loan to get.
