Buying a home in Charleston, South Carolina isn’t necessarily easy. Some people find that they don’t qualify for conventional financing and must consider an option that allows them to pay for a piece of property right away. Enter the hard money loan which uses the value of the property itself as collateral instead of focusing on your ability to repay the lender. That way, if you miss payments, the property can be foreclosed on and sold by the person or business who lent the money to the borrower.
Types of Hard Money Loans
Charleston, South Carolina residents are given options as to which type of hard money loan they get. Each has its own list of pros and cons to consider. Being informed about the advantages and disadvantages of the different types of hard money loans empowers borrowers by giving them factual information so they can make their final decision about financing.
The types of hard money loans available are:
Bridge Loans. If you’re planning on reselling or refinancing a piece of property, this loan allows you to acquire the financing you need before you’ve sold property that you already own.
Fix-and-Flip Loans. Properties that need to be rehabilitated before being sold are the focus of this type of loan. It gives you the money to fix up a place before putting it on the market for sale.
Owner-Occupied Loans. It’s an enticing option for buyers who cannot get any other type of financing.
Construction Loans. When a developer wants to build properties that they can sell or refinance quickly, they apply for this type of loan.
Case-by-Case Loans. A buyer’s needs may be so unique that the lender must determine if they qualify for funding on a case-by-case basis. If no other lending options exist, exceptions may be made for them based on certain criteria.
Asking the lender what types of financing options they have available is one way to be certain that you’re getting the best deal for the money you spend. Hard money loans are designed to give you upfront financing without the need to pre-qualify or have a sizeable down-payment to provide at the time of purchase.
Watch Out for Scams
Not everyone is as honest as they position themselves to be. That’s why you’ll want to take extra care to research the hard money loan lenders that want to work with you. Doing so saves you a lot of hassle and prevents you from signing a contract that you’ll have a difficult time getting out of.
Do Your Research
By researching lenders and learning how the hard money loan process is carried out, you can avoid any legalities that take place when you put your trust in the wrong person or business. You’re able to get the financing you need without going through the hassle of applying for a traditional bank loan and being turned down. The property in which you were interested in buying doesn’t sell to the next interested homebuyer that way because you’ll have the money you need to purchase it yourself.
Why is there such a high interest rate?
There’s much more for the lender to lose which is why interest rates are higher. If a buyer doesn’t come through with their part of the deal, the individual or business that lent the money has legal issues to contend with. These types of proceedings cost lenders time and money.
What types of properties can be bought with hard money loans?
You can invest in many different types of properties including single homes, multi-family homes, land, and commercial buildings. You’re not limited in how you spend a hard money loan which isn’t necessarily the case with standard bank loans. This gives you a better chance to sell or refinance the property you do buy.