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5 Pros Of Using Hard Money Financing
By G. David Lapin On June 15 2023
Hard money financing refers to a type of loan that is provided by private beneficiaries allowing borrowers access to asset-based financing.
1. Faster access to funds: One of the main advantages of hard money financing is its speed. Traditional loans from banks or lending institutions often involve a lengthy approval process, whereas hard money loans can be approved and funded much more quickly. This makes hard money financing a viable option for real estate investors who need immediate access to capital for time-sensitive opportunities.
2. Flexible/Creative terms: Traditional lenders typically have strict qualification requirements. Non recourse loans can be considered. Instead each deal is evaluated case by case by its unique situation. Often, blanket and cross colorization loans can be made. Note most hard money loans have ballooned payments.
3. Asset-based lending: Hard money loans are primarily based on the value of the underlying property, which serves as collateral. This means that the borrower's personal financial situation and creditworthiness are of lesser importance to the private money company. Consequently, individuals or businesses with valuable real estate assets but limited liquidity can still secure financing through hard money loans. Experience of the borrower is key.
4. Leverage: Since hard money lending are typically private individuals (benies) or small private lending companies, they often have more flexibility in their lending terms compared to larger financial institutions. After repaired value is used for value add properties and seller carry notes in secondary position can be considered.
5. No prepayment penalties: Traditional loans often have prepayment penalties if the borrower decides to repay the loan early. In contrast, hard money loans often do not carry prepayment penalties. This can be advantageous for borrowers who plan to sell the property or refinance with more favorable terms after a short period.
It's important to note that the specific terms and conditions of hard money financing can vary between lending sources, so it's crucial for borrowers to carefully evaluate the terms and consider a viable exit strategy
For more information on our Hard Money Loans or Trust Deed Investments, call our office at 714.838.1474 ext. 102 or visit our:www.hanovermc.com