Short Term Hard Money Loans
Short term hard money loans
Sometimes as an investor you may come across a property that
requires quite a huge amount of money to purchase it but because of
limited resources you forfeit that opportunity. What many investors
especially the beginners are not aware of is that there are several
financial institutions which provide short
term hard money loans within a very short period of time. such
kind of loans are usually preferable to huge investors such as real
estate companies that often buy land and other property that they
come across. The term hard is used simply because it is somehow
hard to pay back. These loans are normally provided by individuals
or other small groups based on either your credit score or your
collateral. The good thing is that you may have a low credit score
but still qualify for the loan since what they usually look at is
the size of your assets.
If you are an investor and you are looking forward to increase your
financing sources then these types of loans are best for you.
However you should be aware of the risk involve before you get into
it. There are several pros and cons of short term hard money loans.
Below are some of the advantages and disadvantages.
More options for collateral
The good thing about hard money lenders is that they accept many
types of collateral unlike other financial institutions. You can
even use your anticipated cash flow from the asset you want to buy
or even your home as collateral. They can also lend you up to
sentry five percent of the value of the property you want to buy.
And just in case things don’t go your way and you are unable
to meet the LTV ration then you are allowed to use assets such as
your retirement benefits, house etc. as collateral.
Flexibility
These loans are very easy to get and most experienced investors use
such loans to finance renovations and repairs since they can
quickly close the transaction and then establish separate accounts
with the financial institutions in order to pay for the renovations
and repairs.
Higher risk and cost
One disadvantage of short term hard money loans is that they
attract high interest rates and lenders always demand upfront fee.
You also stand to lose your property used as collateral just in
case things don’t work out.
In summary, short term hard money loans are a quick way of getting
finances especially for the big investors such as real estate
companies. However, it is important to understand the risk involved
before applying for the loan.