The terms hard money, hard money loan and hard money lenders often come up in real estate transactions, but some people aren’t exactly sure what they mean. Basically, a hard money lender is an private individual, or group of people, who lend money for mortgages based on the property that is being bought rather than your credit rating. Since the borrower may have an average or below average credit rating, they’re usually considered a higher risk and therefore the hard money loan will come with higher interest rates.
Hard Money Loans for Real Estate Investing
House flippers, developers, and real estate investors are among those who are typically interested in a hard money loan since it enables them to sometimes borrow as much as 100 percent of the property’s purchase price. If you’re finding it difficult to acquire a standard mortgage for a multi-family investment property but need cash quickly for a property that will turn a profit, a hard money loan could be the best answer.
Some real estate investors apply for a short-term hard money loan to purchase a property and then fix it up to raise the value of it. Once the property’s value has gone up, the borrower may then get the property re-appraised, and refinance it institutionally based on the newly appraised value. Many hard money loans can be accessed within a week since there isn’t as much red tape, but origination fees usually exist. The specific terms of the loan will depend on the property involved as well as the length of the loan and the lender. Your credit rating, income, and assets won’t usually need to meet any minimum or standard to receive a loan.
A hard money option is ideal for those who will be obtaining long-term financing in the near future, such as six months to 18 months down the road. The hard money loan can then be paid off in a lump sum or it can be paid off at closing if you intend to sell the property. Some lenders may even give you lower interest rates in exchange for a portion of the profits if the property is being sold. A multi-family investment property can often be bought with no down payment if you’re using hard money since the loan often covers the entire cost of the property, if you are borrowing the funds for the purposes of construction.
Hard money isn’t always recommended for long-term investments as they’re more suited for an initial purchase, a fix-up project and, a short-term flip. If you’re interested in more information regarding hard money loans for multi-family investment properties such as the amounts available, loan to value ratio, the terms, interest rates and origination fees, please feel free to contact us at MortgageMeister.com at your convenience. Our team of mortgage professionals will gladly answer all of your questions regarding hard money and all other types of mortgage-related loans.