Pasadena Hard Money Loans: Advantages and Drawbacks
As you explore your options for financing a project or purchase, it helps to consider every possible strategy. One that you may have overlooked is the hard money loan. As with any type of financing, this solution may be ideal for you, depending on your situation. Here are some of the pros and cons you should know about these loans before making a decision about applying.
What is a Pasadena Hard Money Loan?
A hard money loan is an asset-based form of financing. This simply means that you are pledging an asset as security for the loan. Typically, you retain control of that asset and may use it for the loan duration. In the event you default on the loan, the lender has the right to seize the asset and use it to settle the remaining balance. Once you pay off the loan in full, the lender relinquishes all claims to the asset, and you are free to retain it, sell it, or do whatever you like with it.
Your Credit and Receiving a Pasadena Hard Money Loan
One of the advantages of Pasadena hard money loans is that lenders do not place much emphasis on your credit score. Since these loans are often offered by private investors or non-institutional financing companies, they use a different set of qualifications that you would find at a bank or credit union. What will be important is the market value of the asset you wish to use as security for the loan.
It’s not unusual for hard money lenders to require what is known as real property. Real property is usually identified as property that is fixed in place and is likely to remain so. For example, your home and the land where it’s built would qualify as real property. If you own undeveloped land, it would also be acceptable as security.
You may find that some lenders will accept other types of property as collateral. Assets like artwork, stock shares, or jewelry may be acceptable. The only way to know for sure is to ask in advance what sort of assets the lender is willing to accept.
What About Interest Rates?
Generally speaking, the interest rates on hard money loans tend to be higher than on more traditional loans. This has to do with the amount of risk the lender is taking on in order to fund your investment property. There is always the possibility of real property being damaged during some sort of natural catastrophe. The fact that the lender does not require a minimum credit rating like other lenders also increases the risk.
Does Loan Duration Make a Difference?
Many entrepreneurs use Pasadena hard money loans when they expect to pay off the debt in a relatively short period of time. Hard money is a form of short term financing, also known as bridge funding, which allows you to quickly purchase a property. Typically, hard money should be considered a form of short term financing. Hard money has a higher than average interest rate, and thus – if held for a long term period of time, can be super expensive. Many real estate investors use hard money first, to buy the property, then refinance the property with a traditional lender – or sell it.
What does Delancey Street Want?
Delancey Street is a top rated hard money lender that focuses exclusively on the value of your asset. Our team cares about a few things only: who you are, what you plan on doing with the property, and how you plan on repaying the loan. Ultimately, and simply put, we care about why you need the funds, and the value of the property. If we feel the property is valuable – we’ll lend against it.