You have heard about hard money loans and you want to seize the chance to make some money. However, you don’t know what to expect from this options, so here are the basic facts you need to know. The biggest benefit of hard money loans is how the lenders are always concerned of the property value and not about you personally. This means that the property acquires you the loan and not your existing credit status.
Hard money loans are a form of loan that can more or less have one to six months life, but you can get up to two or more years extension. Not like the average banks, the lenders can have you approved (or not) in as little as two days. Be ready to respond as to why you prefer a hard money loan instead of a traditional loan. There could be many reasons why you considered this type of loan and one of them is the urgent need of the money because you want to grab one great opportunity.
Hard money lenders want to know the type of collateral, the location and approximate worth of the property, the amount owed, and the exit strategy or how you will pay back the loan. Most firms want your business and they will work with you to obtain you 60 to 75% financing. You can get 100% financing in some cases if you put additional assets into the deal. These private companies normally won’t get 100% of the property value so the low loan to value is provided as an option to protect the lender in case of default.
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You ought to be ready because hard money loans have much higher interest rates than traditional loans, which could be 10 to 15% depending on the overall risk. The lender will set points or origination percentages also between 1 and 5% of the loan that is assessed at the close of the deal. However, the higher interest rates, flexibility and quick turn-around of the loan frequently make up for all the paperwork and time involved when dealing with traditional banks.
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You have to expect that some hard money lenders charge a pre-payment fee or an exit fee for the loan while others charge nothing. Make certain that you precisely know the terms of the proposed loan prior to engaging with any lender. One thing you can have is a thorough letter of intent so that you and the lender will be aware of what each party exactly expects.
It is very important to do some in-depth research in order to be familiar with the hard money loans. You can talk as well to those have experience with this type of loan or ask your lawyer to help you. Keep in mind that the web offers plenty of information that you can utilize to your advantage.