Need money for your short-term investment needs? Try Hard Money Lending

Hard money loans are often associated with not a good market reputation which is completely undeserved. This is mainly because hard money loans in Houston are funded by private investors as opposed to banks and registered financial institutions for conventional lending which gives a vibe that is associated with some kind of insecurity. But the true fact is that hard money lending provides more benefits than traditional lending and are specifically based on the value of the investor’s property instead of the financial history or credit score of the borrower. To reap the benefits of this kind of lending it is better to know what such funding option entails and how to make the most of such an opportunity.
What is hard money lending?
Also referred to as bridge loans or private money loans, hard money loans are short-term borrowing options that are secured by a real estate. They are usually funded by private investors with a lending period of about 12 months, extendable up to a period of 2 to 5 years. With hard money lending, the borrower needs to pay only the interest or interest along with a certain principal amount on a monthly basis unless otherwise mentioned and a lump sum payment at the end of the lending period.
The amount of hard money that can be borrowed is directly related to the value of the subject property. The property may be either an existing one which the borrower will use as collateral or the one which the borrower is planning to acquire by borrowing the investment sum.
Difference between hard money and soft money
Many people think the reason behind private money loans being referred to as hard money and if it is different from soft money.
A soft money loan follows a traditional structure where the borrower has to have solid credit to his account with proper proof of income in order to be eligible for such borrowing. Such lending is usually financed by financial institutions like banks and credit unions and the loan is awarded at a below-market rate of interest. The borrower gets several years to pay off the loan depending on the purpose for which the loan amount is used and the amount of loan taken.
On the other hand, a hard money loan is given to a borrower who offers a specific property as collateral, be it an existing one or a property to be acquired through investing the borrowed sum. A hard money loan is mostly dependent on the value of the investment property rather than the financial stability or creditworthiness of the borrower.
One of the primary differences between a soft money loan and a hard money loan is that the former carries a lower interest rate than the latter along with the facility of getting interest holiday which can extend the loan repayment period.
Are you a suitable applicant for hard money loans?
Just because hard money loans offer more benefits than soft money lending does not mean that it is a suitable means of finance for all kinds of borrowing needs. These types of loans are suitable only for specific deals.
When purchasing a property with good credit and income history and no possibility of foreclosure or short sale, traditional financing is the best option even though it entails a lengthy approval process. Hard money lending is the source of finance when borrowing from banks and financial institution is not an option. Following are the appropriate deals for hard money loans Houston –
  • Land Loans
  • When the borrower has credit issues
  • Fix and Flips
  • When real estate investors need quick financing
  • Construction Loans
There are other kinds of borrowing needs as well which a hard money loan can satisfy. Therefore, it is necessary to evaluate and analyze the situation before applying for a specific loan type in Houston.

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