During your real estate investment career, you will experience circumstances where you will need immediate cash. Because of the small time period, the standard route, which takes 30 to 40 days, is not feasible. That is why hard money lenders are available. Loans from a hard money lender are usually more costly than most types of lending. The most critical advantage of partnering with a hard money lender is the fast availability of funds. You will be eligible to collect the funds within 72 hours of obtaining the final paperwork from the title firm.
The word “hard money” applies to the rigorous conditions that must be fulfilled before taking out a loan of this kind. Interest rates will vary from ten percent to eighteen percent, making it an expensive choice. When you need cash quick to close a viable sale, though, the cost of capital will become secondary.
There is little or no red tape. Perhaps you’ve discovered a beautiful property that you can renovate easily and sell for a profit. You will need a swift loan because you have a buyer lined up for the house until it is finished. The hard money loan would be in place much sooner and with less red tape than a traditional loan.
Typically, these hard money loans are written for three months to a year. The length of period depends on your requirements and the lender’s requirements. Obviously, the more you have the debt, the most it costs you.
A hard money loan’s LTV
(loan to value) could be smaller than other types of loans. Typically, it’s about 70% or less. This will be decided by a competent property valuation and an estimate of the required repairs. Know that you’ll need a title policy, insurance, and an assessment, all of which will cost hundreds of dollars. The majority of hard money loans would need origination points ranging from 2 to 10 percent of the loan amount. These payments must be charged in full by the time of closure.