Hard Money Loans: A Quick Tutorial
If you have been interested in using hard or private money for your next commercial loan, you may have some questions about how this loan system works. Here is a quick tutorial on hard money loans:
What are they?
Hard or private money loans are simply a short-term loan supplied by a private investor. It is a secured loan using the equity in an existing property. Hard money investors are not normally concerned with credit ratings since the real property equity secures their investment. Interest rates are normally higher than conventional loans since there is less review of a borrower’s credit or other finances.
Why use them?
Some conventional banks will tell you hard money is only useful for those with credit or other financial challenges. That is not true; hard money loans are useful for land purchases, properties bought at auctions, or renovations on older properties to flip them. These are all purchases that may not qualify for conventional financing, thus making a hard money loan useful.
Who uses them?
Real estate investors often use hard money financing to finance property purchases. Opportunities come quickly and prime properties will be lost if financing is not secured quickly. Because hard money can be obtained in a matter of days rather than weeks for conventional financing, investors can take advantage of this to get ahead of their competitors. Hard money is also an advantage to those with poor or limited credit who have existing equity in a property.
If you have more questions about hard money financing contact Shop Commercial Mortgage today by calling us at 813-516-5210. Our investors are standing by to assist you with your financial needs.