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Important Things You Should Know About Hard Money Loans One of the major challenging tasks that investors tend to face is to find a reliable financing to be used 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. Majority of these fix-and-flip investors would prioritize securing hard money loans in order for them to successfully fund their projects. 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 a few very important things that you should know when it comes to hard money loan. Higher rates and shorter terms. Each hard money lender have different terms. 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 know that rehabbers can actually complete their renovation projects as well as having the properties resold before the due dates of their loan and will use the proceeds of the sale as payback for their loans. The loan’s structure works with the idea that while the renovation is ongoing, monthly interest payments are due and once the home is sold, principal becomes due. As mentioned earlier, hard money loans have shorter terms than conventional mortgages and it is because of this that they tend to have higher interest rates.
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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. Hard money loans can be processed really quick, with some lenders capable of providing you same day loan approvals. You can also expect rapid dispersion of funds usually 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. 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. You can also enjoy the versatility of hard money loan. Being one of the fix-and-flip investors, you can actually amplify profit opportunities with hard money loans if you cover more types of properties.