Finding a loan via a traditional lender can be a real pain, especially if you have a very poor credit history. With a very low credit score, it could take you weeks or months to be approved for mortgage. It doesn’t matter how urgent your need is – you’ll still have to wait. hard money lenders, on the other hand, think about the collateral you are giving up as opposed to your ability to pay the loan back. Santa Monica hard money loans are usually intended to help companies with funding or buy a land. If you neglect to pay back the hard money lent to you, the lender can seize the collateral and sell it to regain their initial investment.
hard money is are most suitable and valuable to investors who want to renovate or improve a property property prior to selling it at a higher cost. Real estate investors generate an ROI and repay the borrowed cash within a short period of time.
hard money loans, like any other financial instrument, have its advantages and disadvantages. The content on this page discusses a few of the pros and cons of hard money loans.
How fast it takes to get funding
Santa Monica Hard money lenders aren’t worried about your credit rating. Hard money lenders are only concerned about the asset and will process your loan quickly if your collateral justifies the loan. It is important to note that hard money lenders are not always interested in taking possession of your property. They are fast because they spend less time checking your income, bank statement, along with other details. They only care about the potential value of your property. This is important to remember, because if the assessment of the property doesn’t justify the loan – then the lender won’t give you the loan. If you intend on selling the property after acquiring it, then the Santa Monica hard money lender will want to know the after repair value as well.
Unlike the traditional loans, hard money loans agreements and provisions are flexible. Rather than dealing with a large corporation, you will be talking to an individual who is prepared to assist you design the best repayment progra
In regards to borrowing a hard money loan, the creditor is more concentrated on collateral. If you want to invest in property, the lender will give you a loan worth as much as the home. In the event you have other financial assets to place as collateral, the lender will also consider its worth before approving the loan.
In case you have any difficulties with your credit history, then it will not be that important. Some lenders do not even look at your credit rating.
In terms of loan-to-value ratios, hard money lenders keep them to the minimum with the maximum being between 50 and 70 percent. They do this to give themselves a better chance of getting their money back should they must market the home after your inability to repay the loan.
You can apply and get a hard money loan in a matter of weeks. This is advantageous, especially to borrowers looking to purchase mortgages. The investor won’t wait too long to get the money he or she wants to pay a hot potential deal. Traditional loans involve a much longer process and require time to be accepted.
Unlike the conventional loans that require longer to be paid, hard money loans have been made as a short term term lending instrument. This means that you will need to pay back the loan in the shortest period possible – otherwise, you risk the lender taking your property. If you do not meet this requirement, the lending institution will take the property and sell it to try and get back his/her money.
In contrast to the traditional loans, hard money loans are more expensive. In addition to the loan origination, you’ll also pay closing and servicing expenses. If you take a hard money loan a loan, it may cost you 10 percent more than it might have on the standard loans. Obviously, hard money loans are much convenient.
The rate of interest for repaying the hard money loan can also be high because the lenders are facing greater risks when giving you the loan. The interest rates usually range between 9 and 14 percent.
Requirement of Equity
Before giving you a hard money loan, lenders ask that you provide a down payment of around 25-30 percent. This is supposed to function as an incentive to motivate you to stick to the agreement. This is only because they try as much as possible to help keep you interested in paying back their money. It also helps the creditor to tie you to the contract even when you realize you’re making a loss.
Before committing to a hard money loan, you should first assess all the available lenders, their rates, and requirements. It’s also wise to consider the benefits and drawbacks of hard money loans before applying for one.