Getting a loan from the traditional lenders can be a real hassle, especially when you have an imperfect credit history. With a low credit score, it could take you weeks or even months to be approved for a loan. It does not matter that sometimes you are in dire need of quick cash. Hard money lenders, on the other hand, consider the collateral you are giving up rather than your ability to pay the loan back. Hard money loans are often intended to boost businesses or buy a house. If you fail to pay back the hard money lent to you, the lender will seize the collateral and sell it to get their money.
Orange County Hard money loans are most convenient and beneficial to investors who want to renovate or develop a real estate property before selling it at a higher price. They generate their profit and pay back the borrowed money within a short period.
Orange County Hard money loans, like any other product, has its advantages and disadvantages. This article discusses some of the pros and cons of hard money loans.
The hard money loan market is hot with amazing offers, and the lenders are not worried about your credit rating. The lenders are more concerned about the collateral and will process your loan quickly if they approve your application. It is important to note that hard money lenders are not necessarily interested in taking possession of your property. They are fast because they spend less time verifying your income, bank statement, and other details. It is much faster and will work to your advantage if you have an existing relationship with the lender.
Unlike the traditional loans, orange county hard money loans agreements and terms are flexible. Instead of dealing with a large corporation, you will be talking to an individual who is willing to help you design the best repayment plan. They do not follow or set standardized procedures to determine how you will repay the loan.
When it comes to borrowing a hard money loan, the lender is more focused on collateral. If you want to invest in real estate, the lender will give you a loan worth as much as the property. In case you have other assets to place as collateral, the lender will also consider its value before approving the loan.
If you have any issues with your credit history, it will not be that important. Some lenders don’t even consider your credit rating. Nonetheless, you will need to discuss your personal finances with them.
When it comes to loan-to-value ratios, hard money lenders keep them to the minimum with the highest being between 50 and 70 percent. They do this to give themselves a better chance of getting their money back if they have to sell the property after your inability to pay the loan.
You can apply and get an orange county hard money loan within a matter of weeks. This is advantageous, especially to borrowers looking to invest in mortgages. The investor will not wait too long to get the money he or she needs to pay off a hot property. Traditional loans involve a much longer process and take time to be approved.
• Repayment period
Unlike the traditional loans that take longer to be paid, hard money loans are designed as a short term lending tool. This means that you need to repay the loan within the shortest time possible before the lenders repossess your property. If you do not meet this requirement, the lender will take the property into the market to try and get back his/her money.
• Increased expenses
In contrast to the traditional loans, hard money loans are costlier. In addition to the loan origination, you will also cover servicing and closing expenses. If you take a orange county hard money loan on mortgage, it may cost you 10% more than it would have on the traditional loans. Needless to say, hard money loans are considerably convenient. However, you need to consider aspect of higher expenses.
The interest rate for repaying the hard money loan is also high because the lenders are facing higher risks when giving you the loan. The interest rates usually range between 9 and 14 percent.
• Requirement of Equity
Before giving you a hard money loan, lenders require you to give a down payment of up to 25-30 percent. This is supposed to act as an incentive to motivate you to stick to the agreement. This is because they try as much as possible to keep you interested in paying back their money. It also helps the lender to tie you into the contract even when you realize you are making a loss.
Before committing to a orange county hard money loan, you should first assess all the available lenders, their rates, and conditions. You should also consider the benefits and drawbacks of hard money loans before applying for one.