What distinguishes Delaware hard money lenders from traditional lenders?
The main difference between banks and hard money lenders is that hard money lenders are asset centric lenders. They focus on the collateral associated with the by the person asking for the loan. But, traditional banks are fixated on the borrowers credit and how much money the potential borrower has. It’s super important to remember hard money loans are not great for the long run. The objective of a hard money loan is to be a short term loan that which helps you get the property you’re attempting to buy. Hard money lenders focus on 6-24 month termloans that reap greater ROI than leaving the money in the bank. If you fail to repay the loan, a hard money lender can repossess your property to be able to repay his/her loan.
why is a hard money loan a bad idea?
There’s some really important reasons reasons why a hard money loan is a bad idea. For instance, hard money lenders often charge higher interest rates. This is because of the fact hard money companies think they’re taking substantial risks by lending on an investment property – and want to be reimbursed accordingly. High interest rates make hard money loans unattractive for some kinds of deals. In addition, hard money lenders have shorter loan terms than traditional lenders – that also makes them unattractive. Traditional lender offer 30 year terms but private money lenders offer only 1-3 year terms.
Hard money lenders can help finance your next loan
Hard money lenders assist a very specific group of people, i.e. property investors. Hard money lending is a form of bridge term financing, which is secured by property. Specifically, the men and women who use hard money loans are generally property investors – typically, people who are being denied a traditional loan as a result of stringent guidelines.
Hard money lenders exist because they are fast, and provide 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, rather than your credit worthiness. If you’ve got a checkered financial history, it’ll be easier to obtain financing with a hard money loan rather than a conventional loan which is granted based on your credit report. Below are scenarios where hard money lenders fill a void that conventional lenders don’t touch:
Delaware Hard money loans can be used for repair and flip property investors
Most traditional lenders will not give you a loan to get a fix and flip job. If the home is in bad condition, or there’s some other abnormality with the home, then a traditional lender will not give you funding. Additionally, most fix and flip potential deals”go quickly.” The seller is extremely motivated to sell the property, and will accept the first deal. Traditional 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 loans are great for people with bad credit
Most run of the mill lenders look at a potential borrowers credit score. They verify your income and investigate past delinquencies. It means that somebody with a credit past will have a difficult time, and in some instances never get approved. If this happens, your only choice is to use with a private lender. While the rates of interest for a private loan are higher than traditional loans – if the deal is still profitable, it might make sense to spend the money.
Hard money gives you bargaining power
If you are a real estate agent, more funding means more deals. By using outside money, you can focus on more simultaneous deals that would otherwise be impossible. Conventional lenders consider your entire debt to income ratio, and will not give you funding if they believe you owe too much money. In contrast, a hard money lender does not care about your income, nor do they care about your present debt. The one thing a hard money lender will fixate on is the value of your property. Hard money loans are great for developers who need funds to get their project started but are not a fantastic fit for conventional lenders. Remember, traditional lenders are not interested in taking on additional risks – they legally aren’t allowed to after the 2008 economic crisis. Hard money loans can close faster than conventional loans from a bank, which allows you to move quicker. Many property owners will be flexible on their price and ready to cut you some slack – if you can show buy the property ASAP. Many property investors that rely on conventional lenders are unable to move fast due to delays due to the cumbersome guidelines traditional lenders have. Speed and unlimited money, is why hard money is great.