Decoding The Pros And Cons Of Hard Money Loans At A Glance!
If you want to buy your dream home and sell off the one you own, the first step is to seek a loan to bridge the gap. Traditional mortgage can be time consuming, and often, despite your best efforts, the bank may not consider your loan on priority. When you need money for real estate and you need it quick, a hard money loan could be the answer. All you need is a private lender, who will not consider your income or creditworthiness, but the value of the property you own for shelling the money. In short, a hard money loan is secured against the property, and in case you don’t manage to repay the loan, the lender will take over your property.
While this may sound like a risky adventure, there are many benefits of hard money loans, and in this post, we are discussing the pros and cons in detail.
Benefits of hard money loans
The biggest advantage of hard money loans is the ease of application. Since the lender doesn’t want to verify your income, creditworthiness and other aspects, the process doesn’t take much time, and you can expect to get an approval really quick, based on the asset value. Secondly, there are no fixed terms and conditions with hard money loans, so you can work it out with the lender and can decide the period and other aspects as per your needs. Private lenders are rather flexible in that context.
On the flip side
The interest rate of hard money loans is high, and you will be paying a hefty amount through interest, so it is always better to go for a shorter term, not exceeding 2 years. The APR can be as much as 15%. Also, you have to pay a huge amount in a short time, so make sure that you are capable of repaying the loan on time and how it can impact your personal, financial and business goals.
Don’t rush with hard money loans, but this could still be the best form of lending you need to finance your real estate needs. There are many lenders who work with all kinds of investors, buyers and property flippers, and you just have to ensure that the terms & conditions are known to you in detail. Also, evaluate how much you are gaining from the deal, especially if it is just about property flipping.