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Basic Facts to Learn Regarding Hard Money Loans You have heard about hard money loans and you want to take the opportunity to earn some money. However, you don’t know what to expect from this options, so here are the basic facts you need to know. The biggest advantage of hard money loans is how the lenders are always concerned of the property value and not personally about you. This means that the property gets you the loan and not your present credit status. Hard money loans are a kind of loan that can roughly have one to six months life, though you can get up to two or more years extension. Unlike the typical banks, the lenders can get you approved (or not) in just two days. Be prepared to answer as to why you opt for a hard money loan instead of a traditional loan. There could be several reasons why you considered this kind of loan and one of them is the urgent need of the money since you want to grab one great opportunity. Hard money lenders want to know the kind of collateral, the property location and approximate value, the amount to be paid, and the exit strategy or how you will back the loan. Most firms aspire your business and they will work with you to acquire you 60 to 75% financing. You can take 100% financing in some cases when you put additional assets into the deal. These private companies typically won’t get 100% of the property value so the low loan to value is given as an option to protect the lender in case of default.
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You have to be prepared because hard money loans have much higher interest rates than traditional loans, which could be 10 to 15% depending on the overall risk. The lender will also set points or origination percentages between 1 and 5% of the loan that is assessed at the close of the deal. However, the higher interest rates, flexibility and quick turn-around of the loan often offset all the paperwork and time involved when dealing with traditional banks.
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You have to expect that some hard money lenders charge a pre-payment fee or an exit fee for the loan while others charge nothing. Be sure that you know exactly the terms of the proposed loan ahead of engaging with any lender. One thing you can have is a comprehensive letter of intent so that you and the lender will recognize what each party exactly expects. It is very essential to do some in-depth research in order to understand the hard money loans. You can also talk to those have experience with this kind of loan or ask your lawyer to help you. Keep in mind that the web offers plenty of information that you can utilize to your advantage.