Hard money loans are ideal for repairs, down payment, and other investment costs. A hard money loan is usually a short-term loan with a repayment period of up to 12 months, where the borrower uses a property as collateral. Real estate investors who aren’t comfortable with spending a substantial amount of money upfront to buy real estate can seek a hard money loan for the investment.
How a Hard Money Loan Works
A hard money loan utilizes a property as collateral instead of the borrower’s financial profile and credit. The loan is usually based on the property’s value and has a repayment period of less than a year. These loans are ideal for those who wish to purchase, remodel, and offload homes quickly. Some hard money loans get structured as interest-only loans followed by an extensive balloon payment.
Property Types Ideal for Hard Money Loans
Borrowers can secure a hard money loan on any property ranging from single-family residential, commercial land, multi-family residential, and industrial. Some hard money lenders specialize in a specific property type, such as residential, and can only do land loans if they have experience in the area. Most lenders specialize in one particular niche of loans to minimize the risks associated with defaulting.
Borrower Requirements
Hard money lenders assess a borrower’s equity in the property used as collateral. Most lenders are less concerned with the credit rating of the borrower. Issues on the borrower’s record, including short sale and foreclosure, may need to be addressed, especially if the borrower has adequate capital to cater to the interest on the loan. Most lenders also consider the borrower’s aim for the property. The borrower should thus present a reasonable proposal showing how the loan will get paid off.
Types of Deals Funded by Hard Money Loans
Hard money loans may only be ideal for some kinds of deals. Traditional bank loans are ideal when purchasing a residence with an excellent income history, good credit, and minimal issues such as foreclosure or short sale. The approach is, however, practical if the borrower has adequate time to navigate the lengthy approval process. Hard money is an ideal source of financing when borrowers need a loan for a short time or when conventional loans aren’t an option. Hard money loans can help purchase land, finance construction projects, and fund fix and flip projects.
Hard money loans offer a short-term solution for real estate projects. Individuals interested in such loans should contact an expert from Artis Commercial Capital to identify the assets they need to use as collateral for this loan.