Loans are a wonderful resource that can help you to get the money you may not have on hand to do things like buy a home, buy a car, and more. Hard money lenders are going to be able to help you learn about hard money lending fees, hard money closing costs, and more so that you can find the right loan for your needs. Hard money lenders meaning refers to money loans that are backed by actual property. A mortgage for example is a hard money loan because the loan is backed by the home itself or the property itself.
Hard money lenders’ reviews can often be found on their sites which can help you find the loan that is going to work for you. Loans are necessary for most people as many people simply do not have large sums of money on hand to buy things like homes and expensive cars. Hard money lenders are going to be safer, they often have lower interest rates, and they are often easier to get as you do have some tangible property to help cover the loan and make it possible to take a larger amount out for your loan.
Many people want to invest in commercial real estate but not everyone has the best credit. Many people who are in this situation think that they will not be able to get a loan to make the investments they want to make. This is where hard money lenders can help. There are some real differences between traditional and hard money loans. From the hard money loan rates to the conditions of the loans, here is what you need to know before you borrow money this way.
What is a “hard money loan?”
Traditional loans look at the credit score and history of the borrower. Hard loans are offered by private hard money lenders and they look at different criteria for approving these loans. These loans are often called, “bridge loans.” They are shorter-term loans that can be used to pay for an investment or other real estate project. If a person owns a commercial property and it needs renovations to make the property make money, they can look to a hard money lender for a loan.
Instead of looking at the credit score of a borrower, hard money lenders look at collateral to make their decisions about lending. While it is recommended that hard money borrowers do not use their primary home as collateral for a loan, some do. This can be problematic as you can wind up losing your home if that investment you make does not pan out the way you hoped. For people who already own the property, they can use it as collateral. This is always a better situation. If you are making repairs or renovations to your commercial property, a hard money loan can be very helpful but you have to pay close attention to the hard money loan rates and the other terms of any hard money loan you are considering.
Here are some facts about hard money loans:
- They are much more convenient than traditional loans from banks. While the time it takes to process a traditional mortgage from a bank can take a long time, it can take months, hard money loans are processed much faster. The typical hard money loan has a turnaround time of about one to two weeks. If you need to have access to the money right away, this may be a good idea. The reason for this timing is simple, Banks and other financial institutions are regulated by the federal government and they need to adhere to regulations such as those set down by the Dodd Frank Act. Even if you can qualify for a traditional loan, if you need to close on a deal quickly, you may want to consider a hard money loan.
- There is more wiggle room for the terms. Financial institutions like banks often are not allowed to negotiate too many of the terms of a loan but that is not the case with hard money lenders. Hard money lenders are private. They are lending their own money so they can negotiate more. Everything from the hard money loan rates to the repayment schedule can be negotiated. If you are concerned about the hard money loan rates, you can work with the lender. You can also talk to them about the other terms.
- There are a few options for your collateral. Just like the hard money loan rates, the private lenders who offer hard money loans have some flexibility in terms of what they can accept for the collateral that can be used to secure a loan. For instance, you can ask about using your retirement account or other personal assets. If you are not sure a private lender will take a certain asset, ask! They cannot say yes if you do not ask.
- The costs are higher. It is important to note that all of the costs associated with hard money loans are higher than for traditional loans. Hard money loan rates tend to be between 15 and 18% higher than for traditional mortgages. They can go higher than that.
- You have to pat the money back faster. Mortgages can be for decades but hard money loans need to be paid back within a year or two.
The bottom line is these loans can be very helpful.