Hard Money Loans
Privately funded temporary financing is reffered to as hard money . Hard Money Loans are not designed for permanent financing . The upfront fees and interest rates for hard money loans are not cheap , and they need to be paid off quickly, as soon as your investment property is completed or flipped . Interest rates on hard money loans are usually between twelve and 19% , and have up front fees between 2 and 5 points added to the loan .
Purchasing investment properties with no money down is hard to do , but it is possible if the value of the real estate is more than the hard money loan amount .
When should hard money financing be used ?
Hard money financing should only be used for short term real estate investments . They usually are only given if the investment is worth substantially more than the amount financed . If a property is going to be kept for an extended period of time the Hard Money financing should only be used as a bridge loan, to provide immediate ownership until the investor can get a mortgage loan .
At rare times, hard money can be used by default home owners who need a temporary solution to avoid a foreclosure. Because hard money lenders grand loans based on the value of the property, and not on the credit of the borrower, they will loan to people with poor, or bad credit, if the distressed property has significant equity. Hard money loans for distressed homeowners is usually just a temporary solution . Hard money lenders will generally foreclose on properties with very little mercy .
What makes a hard money lender good ?
When choosing a hard money lender you need to consider the time it is going to take to obtain the loan , the cost of obtain the loan, the monthly interest rate, and other terms . You should also consider how liquid the loan will be, how quickly they can get it to you if you find a great deal that needs a quick closing . If the hard money lender takes several weeks to get financing to you, you’re probably better off getting traditional financing, and can kiss your chances of purchasing that house at the trustee sale good bye .