Finding financing is especially difficult for individuals who aren’t purchasing a primary residence. Hard money loans provide a quick and effective way to finance your real estate investment.
What are they?
Hard money loans are financing opportunities that come from individuals or investors based on the value of the property that you are buying. In these kind of loans, the property being purchased is used as collateral for he loan so in the event of default, the lender will seize the property and sell it.
Pros vs. Cons
One of the major benefits of hard money loans is that they’re fast. Because the property is being used as collateral, lenders are less worried about the particulars of your credit, payment history or financial situation and spend less time trying to prove that you qualify. Hard money loans are also very flexible — lenders and borrowers very commonly negotiate terms and repayment arrangements.
However, they’re expensive. Despite the collateral attached the loan, hard money loans are notoriously expensive. They are only meant to serve as a short term finance option. Also, the way homes and properties are valued is not necessarily backed by a legal standard. As a borrower you could possibly end up in a situation with a loan that doesn’t provide the funding you need for what you’re trying to accomplish.
Who’s it for?
Hard money loans are best for investors—people who are interested in purchasing the home, doing some repairs and then either reselling the home or renting it out for additional income. They are a fantastic way to gain temporary financing if you’re looking to take advantage of the “perfect opportunity”. If you plan to live in the unit, or keep the property long term, it would be best to refinance the home at the higher appraisal rate.
If you are interested in obtaining a hard money loan, it would be best to ask local real estate agents and investors for a recommendation. Working with someone locally is a great way to build a mutually beneficial relationship within the community. Who knows, you may want to work with them again in the future.
Contact Triport today to learn about our hard money loan program.