Hard Money Loans

Hard Money Loans

Having trouble finding traditional financing quickly to rehab your investment property? Hard Money Loans may be the answer for you especially if your credit is less than perfect.

Hard money loan is a loan that secured by a property with loan to value ratio is 65-70%. This means that if your property is worth $100.000. The lender would only give you loan $65,000 to $70,000. So the lender is very well protected. Hard money loans are a specific type of asset-based loans.

In residential money loans, the credit score of the borrower is not important because the loan is secured by the value of the collateral property. This is opposed with the traditional lending criteria that banks look for such as credit score, tax return and income statement

Hard money loans, both commercial and residential, are made by private investors and not institutions. They typically make loans only in their local areas. Hard money lenders can choose who they want to loan to and the terms they want. There are no specific underwriting guidelines that they need to follow like banks

Hard money loans are paid back with a higher interest rate than conventional one. Hard money interest rates can start at 15% – 18% or higher. You will most likely have to pay the closing costs and due diligence. And there will be commitment fees ranging from 1/3% to 1% of the loan amount.

And there may be prepayment penalties if you pay your loan earliest, so make sure to read everything and understand the terms or you will struck in a high interest loan for 6 months or longer.

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