Investing in the real estate market is surely one of the (if not the) best ways to build wealth. However, if you want to make money, you’ll need to be well-informed about it.
Thus, in this article, I’ll offer a comprehensive guide on how the hard money lending process goes. And, there’ll be some other basic information about it available here as well.
So, don’t forget to go through the same till the end and let me know what you think about it. The comment section is all yours.
Hard Money Loan – What Is It Really?
Often used as a rehab loan, a hard money loan is usually backed by a “hard” asset, such as a house or something as such. In this aspect, the collateral is generally evaluated on the basis of the property, instead of your financial capacity. Therefore, even if you don’t have a perfect 720-credit score, you’ll still be able to get money from them.
Here’s another thing. Unlike a normal loan, the procedure of hard money lending can be quite flexible from every point. There are a number of different options:
- Short-term loan.
- Long-term money lending.
- Fix-and-flip loan, and
- Rehab loan.
It won’t take too much time to get the approval from most hard money lenders. Thus, you can take the money and start using the same right away.
Is It A Good Idea To Take A Hard Money Loan?
Yes, of course. When it comes to choosing between a traditional loan and a hard money one, I’ll always opt for the latter, no matter what. Here’s why.
- You won’t need good credit while taking a hard money loan. They’ll provide the same by looking at the value of the house instead.
- Unlike a conventional loaning procedure, a hard money loan usually doesn’t take too much time to get approved. So, it’s ideal for someone who needs some quick cash.
- A hard money loan is usually ideal for a short-term proceeding. However, if you have opted for an ideal lender, they can also offer an extension to you.
However, in some cases, the idea of taking a hard money loan may not bode too well for you. Keep reading to know why.
- Usually, a hard money loan tends to be a little riskier than usual, as you don’t have to offer something you literally own. Thus, the interest rate will be higher in this aspect.
- Also, the risk of paying hidden costs is much higher in hard money loaning than the traditional one. Also, you’ll need to make a 10%-20% down payment as well.
When Will A Hard Money Loan Make Sense?
Although it might not seem so, a hard money loan won’t work everywhere and there are various pros and cons associated with this loan option. So, if you want to put yourself in the best possible position, you must have a solid plan behind you. Hopefully, this section can help you create one accordingly.
- You have a foolproof plan in the market – including buying the house, renovating the same with the lent money, selling it, and returning the cash within the duration.
- You’ll need to offer money in the form of down payment (around 10%-20%) when taking a hard money loan. So, ensure that you have the required amount with you.
- The interest rate of a hard money loan will be quite high. Therefore, it’s important for you to check if you can afford the same or not.
The segment of hard money lending can be somewhat shady depending on where the money is coming from and all.
Hence, it’s always important to do as much research on the market and the lender as possible. Ask loads of questions if you can. Don’t get into the same while being confused.
The Final Say
So, that’ll be all for this blog. I hope I could offer as much knowledgeable information as you need through this article. Nonetheless, if you still think that I’ve forgotten to put something important, don’t hesitate to let me know in the comment section. I’ll try my best to add it up accordingly or inform you about why I knowingly avoided it.
Good luck and have a great day ahead!