An Overview Of Hard Money Loans

What is Hard Money Loan?

Well broadly speaking it is a loan that is secured by real estate from non-traditional lenders (unlike banks and credit unions etc), the amount of which is based purely on value of assets and no less as on borrower’s credit. Some of you might think them as “gangsters” that charge a double interest than banks and other traditional lenders per month! And will cut you if are not paying their money on time. Their intentions are to make you defaulter so that they can steal your property, and it is a last option for you to make a deal with them when no one else will lend you the money Well that may be true in movies but not in a real world. California Hard Money Lenders play an important role in financing all kind of real estate deals across the state and they are considered specialists in flipping houses. Yes it is true that Hard Money Lenders typically have higher interest rates and higher fees than traditional lenders, but have a very short approval period. If they feel ok with the deal they can even approve on the spot as compared to the banks, which have lengthy statements and over a month approval time. Comparing with banks, hard money lenders typically: 1. Can give you loans quicklyrn2. Fund your loans fasterrn3. Doesn’t always require a third party appraisalsrn4. Lend money on distressed properties that need rehab (where as banks typically rely on your credit)rn5. Shorter approval process, less red tape and less paperwork , peace of mind

Cost of Hard Money

Now let’s talk about the loan pricing, for most lenders, they charge around 10 to 13% interest yearly, and a fee called ‘loan fee’ for a 6 to 12 months loan term. Beware of, that in addition to quoted loan origination fees, some hard money lenders would charge fees for credit checks, appraisals, loan documentation, inspections, recordings, reconveyances, etc. (in industry jargon, these are usually called “junk” fees). Here is top tip: Do not just look at the rate and loan fee. If the lender has junk fees, they can have a substantial impact on the true cost of the financing. Using hard money in your house flipping business can be a tremendous benefit for you, it will increase your margins, will help you grow your business, and will allow you to diversify your risk.