Hard Money Lending Advantages

Being able to get money for a property investment in a short period of time isn’t always easy. Many borrowers tend to go to financial institutions to try to get a loan to finance a property, but that isn’t always the best option. It’s important to consider other financing options, such as hard money loans. With the average home in America costing over $300,000, having multiple finance options is crucial for buyers. Hard money loans sometimes get a bad rap because people don’t take the time to really understand why they can be so beneficial. The following guide walks you through a few of the advantages that come with a hard money loan.

Repayment Terms with Hard Money Loans Are Often Negotiable

When you get a loan from a financial institution, you are bound to the terms they set for the loan. This could mean the interest rate you pay, the date the payments are to be made, how large of a down payment you have to give and more. You do not have a say with most of the terms of the repayment agreement.

Hard money loans work differently. The private lenders work with you to ensure the payments are feasible for you to make. They want to be sure that the payment dates fall on a date that works with your financial situation. This means you can often pick the dates payments are due. If you have to juggle multiple debts at one time, this can be really beneficial overall. According to Consumer Finance, “Getting quotes from multiple lenders puts you in a better bargaining position.” You can compare the rates multiple lenders are offering to negotiate the best terms for your situation.

Qualify for the Loan by Meeting Less Requirements

When applying for a loan with most financial institutions, there are often a lot of hoops to jump through. A hefty down payment is often required. A high credit score and proof of income is needed, as well. With a hard money loan, these factors don’t come into play. The lenders allow you to use the property as collateral for the loan. This makes getting approval the loan less of a hassle.

Avoid Penalties for Repaying the Debt Early

Traditional lenders often charge a fee when you pay off the loan early. This is because they counted on the money, they were going to get from you in interest over an extended period of time. When you pay off the debt early, they acquire far fewer interest payments.

Hard money lenders don’t often require you to pay a fee for paying off the loan early. An origination fee is charged at the beginning of the loan that covers fees for processing the loan. Hard money lenders actually like when you pay off the loan early. They get their money back so that they can invest it in other things. It can also build a rapport with the lenders to make it easier to get approval for a loan in the future.

Gain the Ability to Make Offers on Properties Quickly

The downfall of loans from traditional lenders is that they can take a long time for approval. Every day that you go without approval for the loan is a day that someone else may be buying the property that you want to buy. You can often get approved for a hard money loan in as little as a few days. This allows you to make offers on homes quickly and easily.

Better Your Chances of Getting a Property

When someone is selling a property, they often want the buying process to finish as quickly as possible. Being able to get money quickly betters the chances of a seller accepting your offer over someone else. This can mean that you are able to get premium properties at rock bottom prices.

When choosing a hard money lender, it’s important to talk to them about the property that you plan to buy. You need to know how long you plan to own the property because you will be responsible for the payments until you are able to sell it. Hard money loans are designed to be short term. This means you have a very short term to pay them off. Be sure that any property you choose to purchase can be sold quickly so that you can pay off the loan on time.

References:

https://www.consumerfinance.gov/owning-a-home/explore-rates/

https://www.census.gov/construction/nrs/pdf/uspricemon.pdf

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