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Basic Facts to Learn Regarding Hard Money Loans 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 alternatives, so here are the basic facts you have to know. The biggest advantage of hard money loans is how the lenders are always concerned of the property value and not personally about 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 might be lots of reasons why you considered this type of loan and one of them is the urgent need of the money because you want to take 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 aspire your business and they will work with you to acquire you 60 to 75% financing. You can have 100% financing in some cases once you put additional assets into the deal. These private companies usually won’t get 100% of the property value so the low loan to value is offered 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 usually compensate all the paperwork and time involved when dealing with traditional banks.
Overwhelmed by the Complexity of Loans? This May Help
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 certain that you precisely know the terms of the proposed loan prior to engaging with any lender. One thing you can have is a detailed letter of intent so that you and the lender will understand what each party exactly expects. It is crucial to do some in-depth research in order to be aware of 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.