Essential Facts to Know on Hard Money Loans
You have heard about hard money loans and you want to seize the chance to make 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 benefit of hard money loans is how the lenders are always concerned of the property value and not about you personally. This means that the property secures you the loan and not your current credit status.
Hard money loans are a type of loan that can approximately have one to six months life, although you can get up to two or more years extension. Unlike the typical banks, the
city private lenders
can get you approved (or not) in just two days. Be ready to respond as to why you prefer a hard money loan instead of a traditional loan. There might be lots of reasons why you considered this type of loan and one of them is the urgent need of the money because you want to take 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 need your business and they will work with you to get you 60 to 75% financing. You can get 100% financing in some cases if 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.
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
city hard money lending
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 frequently make up for all the paperwork and time involved when dealing with traditional banks.
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 important to do some in-depth research in order to be familiar with the hard money loans. You can also talk to those have experience with this kind of loan or ask your lawyer to help you. Bear in mind that the web provides plenty of information that you can use to your advantage.