Are you short on money and not sure where to turn? Each year, millions of Americans take out loans to cover education costs and other living expenses.
Because there are so many Americans in need of loans, there are many lending options out there. When researching lending options, one can easily become overwhelmed by all of the choices.
However, using a hard money lender is undoubtedly one of the best options for those who need to borrow money. What is a hard money lender? And, why should you take out a hard money loan?
Read on to discover the top reasons to use a hard money lender.
What is a Hard Money Lender?
A hard money lender is a type of private lender who lends hard money loans. Hard money loans are backed by tangible assets, such as real estate. These loans are also known as short-term bridge loans, and they’re generally given out by individuals or companies rather than banks.
Because hard money loans rely on collateral instead of the financial status of the applicant, the funding time frame is typically shorter. Often, the lender and the borrower can negotiate the term of the hard money loan.
The term of the loan is mainly based on the value of the property rather than the creditworthiness of the borrower. Often, property flippers seek out hard money loans when they’re planning to renovate or resell real estate. They use the property they’re flipping as collateral for the loan.
Why Use a Hard Money Lender?
So, why should you take out a hard money loan instead of another type of loan? Here are some of the top reasons people choose to work with hard money lenders:
Quick Approval Process
One of the biggest benefits of a hard money loan is the speedy approval process. The approval process is typically much faster than it would be when applying for a mortgage or a traditional loan with a bank.
Because hard money loans are focused on collateral, lenders can make decisions much faster and move the application along much quicker. Instead of combing through loan applications to verify income, a hard money lender will simply need to ensure there’s viable collateral.
Additionally, hard money lenders aren’t as concerned about receiving repayments, because they know they can collect the collateral if all else fails. Therefore, they won’t likely take the time to do an extensive background check on the applicant. In many cases, you can get your hard money loan approved in a few days. Traditional loans can sometimes take over a month to get approved.
Tailored Loan Options
Another major benefit of working with a hard money lender is that they can provide a loan tailored to your needs. The term lengths, interest rates, loan-to-value, and points can all be adjusted on a case-by-case basis.
In some cases, hard money lenders allow borrowers to put forth additional properties they own as collateral so they can get a more flexible loan.
Secure More Properties
Whether you’re fixing and flipping properties or looking to build your real estate empire, a hard money loan is a great option. Hard money loans allow you to reserve your own capital as you secure more properties.
This way, you can conserve the cash you have on hand to complete other projects, rather than having to put this cash toward your new projects. With hard money loans, your funds won’t be tied up in one project.
Don’t Sweat Your Credit Score
If you have a low credit score, you may have trouble qualifying for a traditional loan or good mortgage rate. The great thing about hard money loans is that they typically don’t take your credit score into consideration.
Even if they do ask to look at your credit score, a hard money lender will mainly be considered with the property you offer up as collateral.
Borrow More Money
If you take out a mortgage, you’ll typically be required to put down a minimum of 5 percent of the purchase price. If you take the mortgage out directly from a bank, you may even be required to put down up to 20 percent of the purchase price.
If you put down less than 20 percent, you may be required to take out mortgage insurance, which will increase your monthly mortgage payments.
However, with a hard money loan, lenders are willing to lend you up to 100 percent of the purchase price. With no down payment, you’ll only be responsible for paying the origination fee plus the monthly interest until you pay the loan off in full.
Cash-Out Refinance Loan Options
If you’re investing in real estate, you can use a hard money loan to do a cash-out refinance on the properties you own. This will provide you with the additional capital you need to fund any all-cash purchases you’re looking at.
Or, it’ll give you the money you need to apply for down payments on additional properties.
Are You Ready to Work With a Hard Money Lender?
As you can see, there are many benefits to taking out hard money loans and working with hard money lenders. Now, you just need to find the right hard money lender for you.
If you’re looking for a reputable lender, get in touch with Stonecrest Financial. We offer loans for commercial and residential properties, as well as private capital loans. Call us today at (800) 557-7720. And, be sure to check out our testimonials page.