How Do Hard Money Loans Work?
Hard money loans from AHL Hard Money Network are familiar to some people, but there may be some confusion or misunderstanding about hard money loans and how they work. Let’s discuss hard money financing and how it can be to your advantage to use it.
Hard money is any loan obtained from a private investor rather than a commercial lender. They will lend you money based on a property appraisal or accumulated equity in a property you own. This is different from conventional lenders who are underwriting loans based on your credit score, income statements, and analysis you can repay the loan in its entirety. Hard money investors are protecting their investment with the property you are using for collateral.
Hard money loans are typically considered shorter-term loans because the interest rates are higher. Why are the rates higher? A hard money investor is accepting a higher risk because they haven’t looked at your credit or income, but have only confirmed you own a property that can be resold if you default on the loan. That’s how the investors protect themselves in the event you don’t repay them.
There are reasons why hard money loans are an advantage. If you are a “fix and flip” real estate investor who cleans up properties and resells them, you often will be buying and selling properties much faster than a conventional bank can qualify you for a loan. Hard money loans can be qualified in a matter of a few business days, allowing clients to move quickly on properties available to them.
Another good use of hard money is for short-term bridge loans. A customer may be waiting for the qualification of a conventional loan but needs to move forward on securing a property or starting renovations. Hard money can allow this to happen more quickly, then the conventional loan can be secured later.
If you think hard money financing will offer you advantages for your real estate or other uses, please call the AHL Hard Money Network today at 813-516-5210.