You have heard about hard money loans and you want to take the opportunity to earn 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 gain of hard money loans is how the lenders are always concerned of the property value and not personally on you. This means that the property secures you the loan and not your current credit status.
Hard money loans are a kind of loan that can roughly have one to six months life, though you can get up to two or more years extension. Unlike the typical banks, the lenders can get you approved (or not) in just two days. Be ready to answer as to why you choose 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 property location and approximate value, the amount owed, and the exit strategy or how you will back the loan. Most firms need your business and they will work with you to get you 60 to 75% financing. You can take 100% financing in some cases when 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.
What Do You Know About Funds
You need to be prepared since 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 also set points or origination percentages 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.
Looking On The Bright Side of Lenders
You ought to anticipate that some hard money lenders charge a pre-payment fee or an exit fee for the loan while others charge nothing. Make sure that you exactly know the terms of the proposed loan before engaging with any lender. One thing you can have is a comprehensive letter of intent so that you and the lender will recognize 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 also talk to those have experience with this kind of loan or ask your lawyer to help you. Remember that the web offers plenty of information that you can use to your advantage.