Athens-Clarke, Georgia is home to a growing number of technology companies and the University of University of Georgia. It’s a great place to live and work because it allows you to enjoy the fun of downtown Atlanta and the beauty of Athens. Whether you want to invest in property or buy a home in Athens-Clarke, not everyone qualifies for a standard mortgage. In Athens-Clarke, you have options to obtain a mortgage such as business line of credit, home equity loan or hard money loan.

Hard Money Loans are Private Loans Based on the Value of Collateral

Hard money loans are simply a type of mortgage that is for real estate with short-term loan terms. These loans are funded by companies or private investors and not banks or credit unions. The terms of hard money loans vary from two to five years. The types of hard money loans include, but are not limited to:

• Fix-and-flip loan: These loans provide you with a way to purchase property, rehab it, resell it and pay the loan off quickly.
• Construction loan: These loans allow a real estate developer to start building a project quickly with the goal of refinancing and selling it as quickly as possible.
• Owner-occupied loan: These loans provide you with a way to purchase a home if you don’t qualify for a traditional mortgage.

The disadvantage of obtaining any type of hard money loan is that a lender requires cash up front. The specific amount depends on the value of the property used to obtain the loan. Traditionally, the down payment is 20 percent of the Loan-to-Value (LTV) ratio or After-Repair-Value (ARV) ratio.

The advantage of hard money loans is that lenders don’t base their decisions on things like credit scores, income and debts. Instead, they are more interested in the actual value of the property. The property or something of value is always used as collateral for hard money loans.

When Should You Consider Taking a Hard Money Loan?

Hard money loans are usually used for business investments. However, they are for everyday people wanting to purchase property without going through traditional banks and credit unions. Everyone’s situation is different. However, there are some few situations where hard money loans are the way to go:

• You can’t obtain financing anywhere. Funding is difficult, whether you are a real estate investor, private investor or someone wanting to buy property. If banks and other lenders don’t want to provide financing, you may want to try a hard money loan.

• You need money immediately. Hard money loans get you the money you need sooner than a traditional mortgage. This is helpful because real estate moves quickly. So you may miss an investment opportunity while waiting for a traditional mortgage.

• Your credit score is poor. Hard money loans are based off the property’s collateral, not whether a person can repay the loan. This means if you have bad credit or poor credit score, you may not qualify for a traditional mortgage regardless of the amount you have for a down payment.

When to Avoid Hard Money Loans?

Avoid taking a hard money loan out if your situation includes things like not having good financing in place. If you don’t have the money for refinancing a loan, you should avoid taking a hard money loan. You have other financing options available, hard money shouldn’t be an option. Those other financing options may have better interest rates and repayment terms.

Contact an Athens-Clarke Hard Money Lender

Hard money lenders do charge a higher interest rate because the loans are riskier. However, the loans are a saving grace when traditional loans aren’t an option, but you need to purchase property. To determine the best type of hard money loans in Athen-Clarke, speak to a hard money lender near you.