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Important Things You Should Know About Hard Money Loans Investors would agree to the fact that it’s quite a challenge having to secure financing for their projects. It is necessary for rehabbers to secure the capital first before they can start home renovation for eventual rental or sale, and to be able to acquire the property, cover the listing fees, pay contractors, and many other expenses. Most fix-and-flip investors would rely on hard money loans when it comes to funding their projects. The thing about hard money lenders is that they specialize in funding investors in the fix-and-flip community and they even usually offer a quick turnaround and a lot more financing options that they can’t find on traditional banks. Below are important things you may want to keep in mind when it comes to hard money loans. Hard money loan offers higher rates and shorter terms than traditional bank loans. Each hard money lender have different terms. However, you can be certain that these loans will offer you shorter terms than traditional bank mortgages that also comes with maturities that goes up to three years. Lenders would know that rehabbers can actually complete their renovation projects as well as having the properties resold before the due dates of their loan and will use the proceeds of the sale as payback for their loans. The loan’s structure works with the idea that while the renovation is ongoing, monthly interest payments are due and once the home is sold, principal becomes due. Because hard money loans come in shorter terms, you can expect it to have higher interest rates compared to conventional mortgages.
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One major advantage of hard money loans that conventional bank financing can’t offer is a faster access to capital. The process involved in hard money loans is quick and some lenders would even provide loan approvals on the same day. Generally, they disperse funds rapidly within days of approval. Fix-and-flip investors enjoy a fast turnaround on these loans while also enjoying a distinct advantage as they compete with other buyers. Also, when it comes to hard money loans, lenders will focus mostly on the property’s value and not so much about the wealth of the borrower. Rehabbers will still be able to avail of hard money loan even if they don’t have a perfect credit score or if they have experienced foreclosure before or even bankruptcy just as long as they have proven skills and are seeking to finance a property. You can also enjoy the versatility of hard money loan. The more types of properties you cover as a fix-and-flip investor, the more profit opportunities you can enjoy with hard money loans.