When it comes to borrowing money for buying a house or any other reason, most people turn to traditional financing options. While taking out a conventional loan or a mortgage is the most popular way to finance a major purchase, there is another option worth considering if you’re looking for a short-term loan with less demanding requirements.
Hard money loans or those secured by real estate properties are faster and easier to obtain than conventional mortgages. In general, such loans have shorter terms, with lengths ranging from six months to a few years. This is the reason hard money loans tend to have higher interest rates than conventional mortgages.
Due to their high rates, some people stay away from hard money. The truth is, however, it is not as bad and scary as money people think. Hard lenders in Florida note that they can be useful in certain situations, such as:
When it comes to flipping houses or renovating properties in despair (with the intention of selling them), most people prefer the lenient requirements of obtaining a hard money loan. This is because conventional loans require more paperwork and can take months to get approved.
Buying a lot and building a property.
Just like flippers, builders also prefer hard money loans when buying a lot and building a new structure for it. This follows selling of the property to pay off the loan faster.
Getting a loan with credit issues.
Those who have been rejected by banks or have had a foreclosure on their record but have some cash for a down payment, hard money loans can be a good option. This gives buyers the opportunity to buy the property before someone gets it. The good news is refinancing with a conventional mortgage may be possible later on or when the credit rating improves.
Real estate investing.
Sometimes, property investors turn to hard money lenders when they encounter a great property but don’t have enough money on hand. The lenient requirements and fast approval allow them to buy the property quicker and make profits on it.
Be sure to exercise caution when borrowing hard money. Talk to a reliable lender and take time to review the terms of the loan before signing on anything.