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Guidelines To Understanding Hard Money Loans Investors find it challenging enough to find a good financing for their projects. Securing a capital is necessary for rehabbers before they can start renovating a home for rental or sale eventually, and to acquire the property, cover listing fees, and many other expenses that are necessary. In order for fix-and-flip investors to fund their projects, they would rely on securing hard money loans. Hard money lenders are known to be specialized in catering fix-and-flip community and would offer a turnaround that is much quicker and more financing options compared to traditional banks. Below are things you have to know about hard money loans. Hard money loan offers higher rates and shorter terms than traditional bank loans. You can’t really expect one hard money loan lender to have the same terms as every other lender. However, one thing for sure is that these types of loans can give you a significantly shorter term than those of traditional bank mortgages and these usually have maturities that would range from one to three years. Lenders would expect rehabbers to have their renovations done and that they should have resold properties before due of their loans and will use the sale proceeds to be able to settle their loans. The loans work in a way that monthly interest payments will be secured during renovation and once the home is sold, principal will then become due. Because hard money loans come in shorter terms, you can expect it to have higher interest rates compared to conventional mortgages.
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The thing about hard money loans is that you can actually gain access to capital a lot faster than conventional bank financing. The process involved in hard money loans is quick and some lenders would even provide loan approvals on the same day. Generally, they disperse funds rapidly within days of approval. The fix-and-flip investors are enjoying a distinct advantage on the fast turnarounds on the loans in terms of competition with other buyers for properties. Also, when it comes to hard money loans, lenders will focus mostly on the property’s value and not so much about the wealth of the borrower. Rehabbers will still be able to avail of hard money loan even if they don’t have a perfect credit score or if they have experienced foreclosure before or even bankruptcy just as long as they have proven skills and are seeking to finance a property. You can also enjoy the versatility of hard money loan. The more types of properties you cover as a fix-and-flip investor, the more profit opportunities you can enjoy with hard money loans.