If you lack the cash to start a business or develop an investment property, hard money loans can benefit you. However, before applying for one of these loans, it’s important to know the pros and cons, so that you can decide whether it’s worth it.
An Introduction to Hard Money Loans
Private companies or individuals offer hard money loans, which are short term, non-conforming loans that are secured by surety. People who have been denied conventional loans or don’t want to wait so long for approval should consider hard money loans.
An advantage of hard money loans is that they are secured by the property to be bought. Collateral can be seized if the borrower defaults on the loan.
Reasons Borrowers Seek Hard Money Loans
The main reasons a borrower wants a hard money loan include:
- Investing in Commercial Real Estate. An entrepreneur owner who can’t secure conventional financing might seek a hard money loan to acquire commercial real estate. Also, Entrepreneurs who want to purchase a property without conventional financing or who cannot get their needs met by traditional commercial loans may find hard money loans suitable.
- Flipping a House. Real estate investors can use these hard money loans can be utilized by real estate investors who purchase low-cost properties, make renovations and repairs that boost their value, and then flip the houses for a profit. Typically, flippers prefer fast-moving financing for these projects since they quickly happen.
- Buying investment property. Investors who are unable to access traditional financing can access hard money loans to invest in rental properties. In addition, persons with poor credit histories or those who need more money than they can get from conventional lenders can use the method.
- Rates for hard money loans. Based on the loan amount and property value, a hard money lender can lend a certain amount of money. There are usually limits to loans made with hard money, which means a substantial down payment is required. Sometimes, lenders loan based on the value of an improved property (ARV). The ARV is the property’s estimated value after improvements have been made.
Requirements for Hard Money Loan Borrowers
A hard money lender’s main concern is the amount of equity a borrower owns in the collateral property. Foreclosures or short sales may not be taken into account for borrowers who have the capital to pay the interest. In addition, lenders look at the borrower’s plan for how they anticipate using the property. Borrowers are also required to provide a realistic repayment plan.
Need a Hard Money Loan?
POM (Peace of Mind) Capital & Funding Services can help you. If you need fast capital to make your real estate business happen, there’s no need to despair—we can help. At POM Capital & Funding Services, we pride ourselves on our commitment to service.
If you would like to discuss hard money loan options with an experienced broker, call POM Capital & Funding Services at (631) 354-9290 or write to us at [email protected] to schedule a free consultation with our team.
POM Capital & Funding Services is a leading provider of alternative funding solutions for businesses of all types and sizes, offering commercial finance solutions and products to businesses in the Centerport, New York area and throughout the state of New York.