For many people, conventional banking is a source of financing for personal or business purposes. However, some people may have problems obtaining financing from conventional bank sources. These folks can benefit from the hard money investment industry; let’s review reasons why hard money may be useful to borrowers.
The borrower has real estate equity, but it doesn’t provide cash flow — Conventional banks will look at the income produced by an investment as a consideration for financing. Hard money investors are more interested in the underlying asset, allowing more flexibility in their validation for hard money financing.
The requested loan is too high for conventional banks — If the borrower needs more money than a conventional bank can validate with their strict loan-to-value (LTV) ratios, hard money investors may be more flexible in providing a higher loan amount. Don’t assume a hard money investor will ignore LTV figures, they simply have the ability to set acceptable limits different from a conventional bank.
A faster closing is needed — Conventional banks can take 45 to 90 days or more to qualify, process, and close a loan. Hard money investors can process an investment agreement much faster since they don’t have the same paperwork requirements and a less onerous qualification process.
Hard money avoids losing an equity position to get Investments — Property owners looking for financess may feel they need to bring in an equity partner to infuse the cash needed. This will result in having a partner in the property with the potential pitfalls which can result. Using hard money may have a higher interest rate than a conventional loan, but avoids having to bring investment partners into the picture.
It is not restricted by conventional Investing guidelines — Conventional Investors follow fairly strict underwriting guidelines when qualifying a borrower. When looking at a property the type of asset, neighborhood, income production and other factors are rigorously applied. Hard money investors are not bound by these underwriting guidelines, allowing them more flexibility in where they invest their money.
It offers short-term financing needs — Hard money investing is considered a short-term borrowing need, typically less than a year to perhaps three years. Conventional financing is often reluctant to create short-term loans. Therefore hard money can be an advantage for a borrower looking to renovate or improve a property for eventual sale.
Credit problems are not an automatic barrier — Conventional banks have strict credit requirements for borrowers and a credit rating below 650 or so will normally disqualify you for a loan. A hard money investor is willing to accept a higher risk by using the property equity and requiring a higher interest rate than the bank. Therefore, a lower credit rating may not automatically prevent a hard money loan.
There are issues with the property — Borrowers may be looking to renovate a property in a less than ideal area or one having environmental issues requiring remediation prior to sale. This will usually disqualify a traditional loan, but hard money investors may find the property’s equity or other factors attractive enough to accept the risk.
Whatever your needs for hard money financing, AHL Hard Money Loansshould be your first source for connecting you to hard money investors. We offer prompt endorsements and rapid financing of your loan. Contact AHL Hard Money Loans to discuss your financing needs.