real estate investor
You are a real estate investor looking to grow your investment portfolio.
Hard money lending is based on the value of the property being used as collateral for the loan, and not on the credit scores of the borrower. Banks do not issue hard money loans which is a preserve of private individuals or companies, that see value in this type of potentially risky dealing.
The higher costs of such a loan is often offset by the fact that the borrower tends to pay off the loan relatively quickly, usually within a period of one to three years. Hard money lending is a business model that can be practised as an income generating alternative investment.
Hard money lending can offer several benefits for investors and if you are interested, there are a few steps you can take such as;
You may want to consider investing in hard money lending if:
You are a real estate investor looking to grow your investment portfolio.
You are in a profession with a great income or have surplus cash.
You have a big retirement savings account.
You are retired and are searching for a passive income investment.
You own an estate or trust fund.
You are a successful business tycoon or entrepreneur.
You have won a huge lottery and have disposable cash.
You are able and willing to offer a helping hand to a friend or family member.
Hard money loans do charge a much higher interest rates when compared to normal loans. Most hard money lenders do charge double digit interest rates due to lack of financing options for potential borrowers. Since the lender is also taking a risk by giving you the loan, the 10% to 20% interest charged is normally used as an incentive to have you pay back the loan quickly, to avoid default and losing your collateral asset.
An origination fee is a percentage of the loan charged as a fee by a hard money lender, to process a loan. Due to the risky nature of such an investment, the lender may charge as much as five times the amount a bank would normally charge.
Hard money loans are usually paid back within a few months or a few years due to the prevailing high interest rates. Repayment terms and durations, however, does depend on each contract signed between a borrower and a lender.
Due to the higher than normal interest rates charged by a hard money lender, default in making payments due on the loan will put you as a borrower, at risk of losing your property used for collateral. The loan is supposed to be a short term fix for your funding needs.
Why would you even consider a hard money loan if it is so expensive? Well, you should give it a try if it is proving difficult to get funding from traditional lenders such as banks, when you need the money. Hard money loans are useful due to;
A hard money lender is usually less concerned with your credit scores, income, or bank statements, meaning, you simply need to put up an asset as collateral to access the loans quickly.
Hard money loan agreements are usually more flexible since the lenders don't rely on a standardized underwriting process. Instead, each loan deal is evaluated separately and depending on your situation, you may be able to alter terms like repayment schedules.
Provided you have a collateral, a hard money lender will give you a loan as much as the investment property you are buying is worth. When you need to borrow against another property you own, that property’s value is what the lender takes into consideration.
Hard money loans can easily be obtained from hard money lenders such as groups of private investors or from an individual investor with enough disposable income.
Hard money loans are more common in real estate transactions since banks and other lenders would often rate such investments as being too risky.
Hard money loans are often preferred by individuals with poor credit scores who are unable to get funding from financial institutions. Despite the bad credit ratings, a good enough equity in a property may just interest a hard money lender and convince them to give you a loan.
The costs associated with a hard money loan to you the borrower is usually higher compared to getting funding through banks and other lending institutions, indicating the high risk that the hard money lender is taking by offering you the financing. Despite all that, a borrower is able to get a loan faster, an easy approval process, and potential flexibility in the repayment terms.
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