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Things You Need To Know About Hard Money Loans Investors find it challenging enough to find a good 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. In order for fix-and-flip investors to fund their projects, they would rely on securing hard money loans. The advantage of doing business with hard money lenders is that they specialize in serving fix-and-flip investors and they would usually offer them a much quicker turnaround and a lot more financing options that you can’t avail from traditional banks. Below are important things you may want to keep in mind when it comes to hard money loans. Higher rates and shorter terms. You can’t really expect one hard money loan lender to have the same terms as every other lender. 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 will be anticipating on the rehabber’s completion of renovation work as well as having been able to re-sell their properties before their loans are due and will use such proceeds to be able to pay back 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. As mentioned earlier, hard money loans have shorter terms than conventional mortgages and it is because of this that they tend to have higher interest rates.
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The thing about hard money loans is that you can actually gain access to capital a lot faster than conventional bank financing. Hard money loans can be processed really quick, with some lenders capable of providing you same day loan approvals. 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. Another advantage you can expect out of hard money loans is that lenders tend to put more focus on the value of the property instead of the borrower’s wealth. There’s still a good chance for rehabbers who have proven skills and would like to finance a desirable property to qualify for a hard money loan even if they have a history of bankruptcy or they don’t have a perfect credit score. Another advantage of hard money loans is versatility. The more types of properties you cover as a fix-and-flip investor, the more profit opportunities you can enjoy with hard money loans.