What differentiates Passaic hard money lenders from normal lenders?
The biggest difference between banks and hard money lenders is the fact hard money lenders are asset centric lenders. They focus on the asset associated with the hard money loan. In contrast, traditional banks focus on credit and how much money the real estate investor has. It’s super important to remember hard money loans aren’t good for the long term. The objective of a hard money loan is to be a short term loan that gets you the asset you’re attempting to buy. Hard money lenders focus on 6-24 month termloans that get them a significant ROI. If you fail to pay the hard money lender back, a hard money lender can foreclose on your property to be able 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 bad idea. For example, hard money lenders look for higher rates of interest. This is because of the fact hard money lenders think they’re taking huge risks by lending on an investment property – and want to be compensated at a higher rate than what a bank would charge. High interest rates make hard money loans unattractive for some types of deals. Moreover, hard money lenders have shorter terms than conventional 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 deal
Hard money lenders serve a very specific group of people, i.e. property investors. Hard money lending is a type of short term lending, which is secured by real estate. Specifically, the people who use hard money loans are typically property investors – typically, people who are being denied a conventional loan due to stringent guidelines.
Hard money lenders exist because they are fast, and offer loans with little to no headaches. Hard money lenders have a streamlined application system. They expect collateral and don’t look at your credit rating. They concentrate on your experience, rather than your credit score. In case you’ve got a bad financial past, it’ll be much easier to obtain financing by using 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 do not touch:
Passaic Hard money loans can be used for fix and flip property investors
Most traditional lenders will not offer you a loan for a fix and flip project. If the house is in bad condition, or there’s some other abnormality with the house, then a traditional lender will not give you funding. In addition, most reverse and fix prospective deals”go fast.” 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 find the fix and flip property.
Hard money loans a type of bridge financing
From time to time, your job goes over-budget and as a result you need additional money. Some conventional lenders will deny, because the project isn’t finished. While this can be devastating, a hard money lender might be willing to lend you the money. Hard money lenders are happy to provide money to bridge the gap in financing, and can work with you to fill this void.
Hard money gives you bargaining power
If you’re a real estate agent, more funds means more deals. By using outside hard money, you can get involved in more simultaneous deals that would otherwise not be possible. Traditional lenders consider your overall debt to income ratio, and will not give you a loan if they think 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 only thing a hard money lender will fixate on is the value of your asset. Hard money loans are excellent for developers who need funds to get their project started but aren’t a fantastic fit for traditional lenders. Keep in mind, traditional lenders aren’t interested in taking on additional risks – they legally are not allowed to following the 2008 crash. Hard money loans are finalized faster than traditional loans from a financial institution, which permits you to move quicker. Many property sellers will be willing to work on their price and willing to cut you some slack – if you can show you have funds available. Many property investors that rely on conventional lenders cannot move fast due to delays due to the cumbersome guidelines traditional lenders have. Speed and unlimited money, is why hard money is great.