Thursday, September 3, 2020

Hard Money Loans—Everything You Need To Know

If you’re a real estate investor, you may have heard about hard money loans. Unlike loans that are from conventional financial institutions, hard money loans are given by private investors and have slightly different terms and conditions than conventional loans.

In this article, we’ll discuss what hard money loans are and what benefits they offer to real estate investors.

What Are Hard Money Loans?

Hard money loans are short-term, high-interest loans given by private investors. They are given against a collateral, usually real estate. They are usually for 12 months; however, the loan term can be extended to a longer term. Borrowers have to pay interest, or interest and principal each month with a balloon payment at the end.

The lender usually gives loan on the basis of the value of the real estate that is stated as the collateral. This real estate may be the one the borrower already owns or one that they wish to acquire.

The best thing about hard money loans is that they are not given based on the borrower’s credit score, but on the basis of real estate. Some lenders may still be interested to know the borrower’s credit score or their income, but none of those are as important as the value of the property. This is advantageous to a real estate investor because when they can’t get a loan from a bank, they can still get it from a hard money lender.

Benefits Of Hard Money Loans

These are the benefits of hard money loans:

Quick Process

These loans are characterized by a quick approval process, which is very beneficial for a real estate investor since they require cash to secure a real estate that is up for auction.

Easy Approval  

As mentioned previously, hard money loans are given against a real estate, and are not based on the borrower’s credit score or income. This makes for an easy approval process that other conventional lending institutions don’t offer.

Flexible Terms

Since you’re dealing with private lenders, you can avail of flexible terms of repayment of the loan. This flexibility is not available in big financial institutions as they have stringent terms and conditions for loan repayment.

Wrapping Up

In this article, we discussed hard money loans, what they are, who provides them, and what their benefits are.

In case you’re looking for hard money loans Houston, we highly recommend getting in touch with Capital Concepts!