Financing can be challenging if you want to invest in real estate. While getting funding through more traditional lenders is possible, many opt to use hard money lenders instead. Property flippers often use the services of these lenders to finance their investments. Hard money loans are usually fast and convenient, making them a favorite for fix-and-flip financing. Here are three things to know if you are considering working with a hard money lender.
How Hard Money Loans Work
The first thing to know before working with a lender that offers hard money loans is how they work. Hard money loans are typically used as investment property loans. The terms are usually based on the value of the property you want to invest in, and it's the property that will usually be used as collateral for the loan. For investors that have less-than-ideal credit or have difficulty obtaining traditional financing, hard money loans are an excellent option. Hard money loans can also be faster to obtain, which makes them perfect as short-term fix-and-flip loans.
Where To Find Lenders
If you think a hard money loan will work for your needs, it's time to look for a lender. There are many hard money lenders out there, but taking your time and searching for one that you want to work with will make a difference. Most hard money lenders are individuals or companies instead of banks or credit unions. Looking online and asking other real estate investors for suggestions is an excellent way to find a lender. You will also want to compare and contrast a few different hard money lenders before committing.
Loan Terms Vary
While hard money loans are known for fast funding and approval, it's important to know that loan terms vary. The convenience of a hard money loan comes at a price. You will usually pay more for a hard money loan than you would for a traditional mortgage. Hard money loans have interest rates that typically range from 10 to 18 percent, much higher than those for most traditional mortgages. Before working with hard money lenders, consider whether this type of loan is right for you.
There are a few things to know about working with a hard money lender. First, you need to know how hard money loans work. Second, finding hard money lenders can be challenging, but online searches and word of mouth can help. Finally, loan terms vary, and hard money loans are more expensive overall.Share