Understanding the Concept of Hard Money Lending

Posted On Wednesday, 23 June 2021 21:09

Learning the basic concept of hard money lending is the initial step of knowing more about real estate financing. Experts say that hard money loans are the best companion of every real estate investor because they help quickly finalize deals. You can take a look at https://www.lantzmanlending.com/ if you find it complicated at first. They are licensed hard money lenders who have an excellent history of happy clients.

Meaning of hard money lending

Almost every investor searching for an excellent alternative funding option other than financial institutions and local banks is aware of hard money lending. Knowing the real meaning of the term is also crucial. So, this is a type of loan that an investor can avail for a short-term from individuals and private investors. However, the terms and conditions of the transaction are usually stricter in this case. Despite the tough conditions, it is often a preferable option for real estate investors.

Essential facts about hard money lending

The big picture of hard money lending

Hard money lending is the most common medium that real estate investors can utilize to procure loans keeping traditional mortgage conditions at bay. It is a way of borrowing money from private individuals against short-term contracts instead of applying for loans in banks and other credit unions.

Real estate investors looking forward to refurbishing and selling a property are usually the ones to resort to these loans. While applying for a loan at the local bank will result in a long waiting period, hard money lenders typically approve loans within a couple of days. An investor usually takes this loan aiming to enhance the value of a property, and then once it is sold, he can pay off the moneylender.

Hard money lending vs. other procedures

The primary difference between other money lending procedures is that a hard money lender does not have anything to do with your financial history. He will not even look at your past credits or income.

Instead, what matters for hard money lenders is the value of the property you aim to work on. The ARV or After Repair Value of the particular property influences the approval of your loan application with a hard money lender.

Another big difference between a traditional financial institution and a hard money lender is that it determines their lending conditions. However, if you take a loan from a conventional bank or financial institution, there is a set of government-imposed credit rules that has to be mandatorily followed. It is usually a hassle for real estate investors to go through the lengthy procedure of banks and credit unions.

What are the pros and cons of hard money lending?

The benefits of hard money lending overshadow its limitations. However, we want you to be aware of both, and so here is a list.

Pros:

• Speed of transaction
• Better competitive edge
• Negotiable terms
• No documentation hassle
• Credit history does not matter
• More convenient

Cons:

• Short schedule of repayment
• The interest charge can go too high in case of delay in repayment

Knowing all of the details mentioned in this article means that you will now be able to carry on with your real estate investments without worrying about finances. Besides, now you know that dealing with hard money lenders is not a big challenge at all. 

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