This month’s blog is going to answer one of the most pressing questions people have about hard money loans: why are they called “hard”? No, they’re not going to hand you a pile of concrete cash – Hard Money simply refers to the fact that the interest rates charged are significantly higher than with a traditional lender. These loans, while useful, are more costly to borrowers due to the higher rates and fees, however, there are a number of advantages to a hard money loan vs. a conventional loan.
If It’s Hard, Why Bother?
In property investing of any kind, it can be a challenge to find financing outside of traditional sources. Unless you can fund all your own projects, you’re going to need help. For many investors, the best choice is a hard money loan.
The benefits to these loans typically outweigh the drawbacks. For starters, rather than focusing their attention on credit scores and personal financials, lenders base approval on the underlying asset itself and the likelihood that they’ll get their money repaid in full. Additionally, these loans are offered by private investors rather than traditional banks and lenders, which means they can offer more flexible terms, despite their higher overall costs. Hard money lenders also have the ability move much faster than a traditional source and can close most loans in 30 days or less. In fact, H&O Capital Funding closes the majority of their loans in just 2-3 weeks.
Because these loans aren’t based on a borrower’s financials, it may be easier to get approved or get better financing terms. It could also open up real estate investing to people who have been held back by poor credit in the past. Perhaps you’re working on fixing your personal credit to use it as a financing vehicle, but you need some help getting your real estate investment gig started in the first place. A hard money loan just might be the perfect way to get your foot in the door.
Weigh Your Options
Ultimately, the choice to get a hard money loan depends on your financing needs and whether it suits the type of investment you’re trying to make. Don’t be discouraged by doing a little extra leg work because it will pay off in the end. Although they do have their challenges, these loans would be better referred to as alternative lending or nontraditional loans, because essentially that’s all they are. Find out if they can work with you and find a reliable hard money lender to help you along the way.
H&O Capital Funding has helped countless real estate buyers, sellers, lessees and lessors achieve their goals. Our legacy is unwavering commitment to the communities we serve. Houlihan & O’Malley Commercial Real Estate Services specializes in four distinct, yet overlapping, areas of business: Commercial Brokerage services, Private Mortgage services, Appraisal Services and Advisory services.
For more information on loans that we offer, visit our website.
