Hard Money Lending Advantages
Hard money lending is done by rather wealthy individuals who are looking to make some profit on their money by lending it to those who they consider good borrowers. They especially look for real estate investors and will loan their money to investors who have found a promising property. Hard money lending is a win/win for both the lender and the borrower. The borrower will make a quick profit on their investment in the property they choose and the lender will make a profit on the money that they lend. These are mostly short term loans and the real estate investor uses the hard money funding to buy and then rehab choice properties.
The term hard money lending is a familiar term in the world of finances. Loans that have flexible payment schedules and easy terms are known as soft money loans. The hard money loan has very strict terms and rigid payment schedules that are totally up to the lender. When the hard money financing is from a private source the terms become even more severe.
The lenders of hard money mortgage loans will all have their own particular criteria for loan approval. The experience of the real estate investor will also be a consideration for the approval of the loan. Real estate investors for this reason will profit from building a strong relationship with lenders of the hard money home loan. There are common guidelines that are used for every loan which is anywhere from one half to three quarters of the home value and the post repairs. The length of the loan will be anywhere between six months to five years. The points will be somewhere between two and ten points on top of the loan.
The advantages of hard money lending are that the money is available much quicker than with conventional loans. As soon as the loan is approved the money is there to invest. This is great especially for the real estate investor. Even closing cost money can become part of the loan which is a big advantage to the investor. Because private hard money lenders are individuals, it is then possible to build strong business relationships with the lender. The lenders may not always be easy to find but there are a lot of them who are looking for new opportunities for offering loans. They will all have hard terms and qualifications for their funding. For the investor, once they have found the right lender for their needs they will always know they have the money they need for the investment opportunities they find. This is a big advantage for the real estate investor