How is a hard money lender different from a traditional lender
The critical difference between banks and hard money lenders is that hard money lenders are asset based lenders. They focus on the asset associated with the loan. In contrast, traditional lenders hone in on credit and how much money the potential borrower has. It’s very important to remember hard money loans are not good for the long run. The objective of a hard money loan is to be a bridge loan that which helps you get the investment property you’re attempting to purchase. Hard money lenders focus on short term loans that generate a significant ROI. If you fail to repay the loan, then the hard money lender can repossess your property in order to repay his/her loan.
Why shouldn’t you get a hard money loan?
There’s plenty of reasons reasons why a hard money loan is a terrible idea. For example, hard money lenders look for higher rates of interest. This is because of the fact lenders think they are taking huge risks by lending on an investment property – and want to be reimbursed at a higher rate than what a bank would charge. High interest rates make hard money loans economically toxic for some kinds of deals. In addition, hard money lenders have shorter terms than conventional lenders – which also makes them unattractive. Institutional lender provide 30 year periods but private money lenders offer only 1-3 year loan terms.
Hard money lenders can help finance your next deal
Hard money lenders serve a very specific group of individuals, i.e. property investors. Hard money lending is a form of short term lending, which is secured by property. Specifically, the people who use hard money loans are typically real estate investors – typically, those who are being denied a conventional loan as a result of stringent guidelines.
Hard money lenders exist since they’re fast, and offer loans with little to no headaches. Hard money lenders have a smooth application system. They expect collateral and do not look at your credit rating. They focus on your experience, as opposed to your credit score. In case you’ve got a bad financial history, it’ll be much easier to obtain financing with a hard money loan as opposed to a conventional loan that’s granted based on your credit report. Below are situations where hard money lenders fill a void that traditional lenders do not touch:
Alaska Hard money loans can be used for repair and flip real estate investors
Most traditional lenders will not give you a loan for a fix and flip job. If the house is in poor condition, or there is some other abnormality with the house, then a conventional lender will not give you funding. In addition, most fix and flip potential deals”go fast.” The seller is very motivated to sell the property, and will accept the first offer. Conventional lenders take forever, so by the time the loan is approved – you’ve already lost the property since someone paid cash for it. For those who have a hard money lender on your side who can close a loan in 5-10 days, you can get the fix and flip property.
Hard money can be a form of bridge funding
From time to time, your job goes over-budget and as a result you need additional funding. Some traditional lenders will deny, because the project isn’t completed. Though this can be devastating, a hard money lender may be willing to lend you the funds. Hard money lenders are happy to give money to bridge the gap in financing, and can work with you to fill that void.
Hard money can be used for Commercial properties
Many real estate investors who want a commercial property may get private loans from a commercial hard money lender. At Delancey Street, we finance commercial properties all over the USA, with rates as low as 7%, with terms ranging from 6-24 months. We offer amazing customer service to our clients, with no hidden charges, or bait and switch tactics. We don’t charge prepayment penalties, and there are no income requirements. There are no minimum FICO scores, and we have minimum paperwork. We offer commercial, hard money loans for multifamily properties, office buildings, retail locations, industrial buildings, and much more. We have helped a wide spectrum of commercial property investors secure hard money for many different commercial properties. We work with real estate brokers and hard money brokers who are looking to help their clients get a private money loan. We have financed millions in commercial loans and can work with all kinds of borrowers. Underwriting a business hard money loan takes a lot of effort and requires a knowledgeable team.