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Important Things You Should Know About Hard Money Loans Investors find it challenging enough to find a good financing for their projects. Rehabbers will have to secure the necessary capital before they can begin renovation of any building that may be put on sale or rental later, and this is done to acquire the property, pay the contractors involved, and many other expenses. Most fix-and-flip investors would rely on hard money loans when it comes to funding their projects. The advantage of doing business with hard money lenders is that they specialize in serving fix-and-flip investors and they would usually offer them a much quicker turnaround and a lot more financing options that you can’t avail from traditional banks. Below are things you have to know about hard money loans. Hard money loans have higher rates but shorter terms compared to traditional bank loans. You should know for a fact that hard money lenders offer different terms. However, you can be certain that these loans will offer you shorter terms than traditional bank mortgages that also comes with maturities that goes up 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 loan works with the idea that monthly interest payments are due while renovation is ongoing and principal is due once the home is sold. 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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One of the major advantages you can enjoy from hard money loans is that you can gain access to capital a lot faster compared to conventional bank financing. You can be assured of the fact that hard money loans are quickly processed, with some lenders being able to provide you with loan approvals on the same day. Generally, they disperse funds rapidly within days of approval. Fix-and-flip investors enjoy a fast turnaround on these loans while also enjoying a distinct advantage as they compete with other buyers. Another advantage that you can enjoy from hard money loans is that lenders would focus more on the property value rather than the wealth of the borrower. A reputable, skilled rehabber who seeks to finance a property may still be qualified for a hard money loan even if they don’t really have a perfect credit score or bankruptcy. Hard money loans can also offer you the advantage of versatility. With more types of properties, you can expect hard money loans to be able to amplify your profit opportunities as investors.