Hard money loans are like cash in that they are based on the expected future value of a property after renovation. Hard money loans aren’t based on the current market value of a property. There are many benefits to hard money loans. However, there are cons as well.
The Benefits of Hard Money Loans
Hard money loans offer many advantages. Typically, they can be acquired quickly because these loans are based on the projected value instead of the actual value. However, there are several other benefits.
Hard money loans have a fast turnaround. This is one of the reasons why they close faster than traditional loans. Hard money lenders aren’t primarily concerned with your finances or employment. Banks statements, credit, and tax forms aren’t heavily considered either. Conversely, traditional loans place heavy emphasis on collateral.
Another benefit associated with hard money loans is flexibility. The underwriting process doesn’t have a traditional focus. The terms are written on a case-by-case basis which allows for more flexibility. These loans are offered by individuals and companies. The terms of a hard money loan can be flexible with the ability to adjust payment schedules as well as the terms of a loan.
No Need to Pre-Qualify
A hard money loan doesn’t require borrowers to pre-qualify and search for properties that meet the pre-a[approved loan amount. It’s the reverse. Hard money lenders will approve you for the property you’re interested in, regardless of what it’s worth. If you’re trying to borrow against a property you own, its value determines your loan amount.
The Cons of Hard Money Loans
Just as there are benefits to hard money loans, there are also drawbacks. Many alternative loans come with high-interest rates, and/or loans that are short-term in nature. Also, down payments for hard money loans may vary greatly from one lender to the next. If you have questions about hard money loans, give us a call. We’re here to answer your questions and help you determine if a hard money loan is right for you.