Unmasked: The Truth Behind Hard Money Lenders
Hard money lenders offer fast loan funding for real estate investors. With flexible terms and the ability to close quickly, hard money lenders are not subject to strict government regulations, which often prohibits many investors from obtaining financing.
Case in point: if an investor comes across a hardship, such as a home owner facing bankruptcy or foreclosure, traditional loans can take between 60 days to six months to close. However, hard money lenders can offer fast financing within five to 30 days. This allows investors to take advantage of good deals, acting quickly at below-market values.
While hard money lenders offer higher interest rates than traditional big banks, including shorter repayment periods, balloon payments and lower LTV ratios, this is often the only option available to many real estate investors.
Hard money is easier for investors to obtain. This is primarily because soft money is associated with government lending institutions, which are subject to strict criteria and funding requirements. Hard money lenders are simply a group of real estate investors that are investing their liquid cash resources into investment mortgages. Since they are individuals and not government entities, they require shorter loan terms, instead of traditional 30-year financing options.
Traditional lending institutions focus primarily on the borrower’s credit, while hard money lenders focus on the property’s potential. Because they are not subject to regulated underwriting guidelines, hard money lenders offer a more flexible decision-making process. If hard money lenders believe a property offers excellent long-term returns, they tend to make these projects viable investments for their cash investors.
Since hard money lenders only lend 60- to 70-percent of property values, cash investors can rest assured knowing that if properties go into foreclosure, hard money lenders have equitable interests. This helps prevent disasters, such as that experienced by traditional banks in the years after the 2006 housing decline.
Hard money lenders are an excellent alternative for first-time real estate investors that lack the necessary credit or capital to jump start investment opportunities. Without the benefits of hard money loans, the real estate market would be even further from experiencing a full recovery.
My Hard Money Lenders offers a comprehensive website that details hard money lenders by state. These lenders offer commercial building loans, bridge loans and apartment building loans.