Getting a hard money loan can be the key to investing in real estate. Very often, it can be challenging to arrange for bank loans if you want to buy a distressed property to flip it. Usually, hard money lenders provide loans by using the property as security and charging monthly interest until the loan is paid. Companies such as LBC Capital provide financing to startups and professional investors.
However, it is not just property investors who can benefit from hard money loans. If you have poor credit or have been refused by a bank, you can click here to see if qualify for a loan from Hardmoneylenders.finance.
As with taking out any kind of loan, there are pros and cons to arranging a hard money loan.
The Pros of Hard Money Loans
What are some of the reasons to get a hard money loan if you want to buy an income property?
Arrange a hard money loan quicker
The first benefit to property investors is that the process to arrange a hard money loan is often quicker than a traditional one. Usually, the potential value of the investment property is the most important factor when approving a loan. In some cases, you may have your cash in a few days rather than a few months.
Lower down payment
Some types of hard money loans don’t require any down payment. So, rather than having to find a down payment of up to 20% of the property value, a hard money lender may give you 100% financing. This has allowed some investors to start investing with very little capital.
Hard money loans are perfect for startups
If this is your first investment property, whether its a rental or ‘fixer-upper,’ a hard money loan will get you started quicker. Once you have made your first investment, you may be able to use that to secure a traditional loan from a mortgage lender or bank.
The Cons of Hard Money Loans
Although the benefits of hard money loans make them attractive to investors, there are some risk factors to consider.
Higher interest rates
Hard money loans tend to have a higher interest rate than a traditional mortgage. This is because they are short-term loans and they usually represent a higher risk to the lender.
Higher processing fee
Usually, the processing fee (origination fee) is higher for hard money loans. However, it is good to remember that hard money loans offer borrowers cash quicker and with a much lower down payment than a traditional type of loan.
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