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!
