Look into hard money loans when you need fast cash to fund your next investment project or when you cannot obtain financing through a traditional lending institution. Hard money lenders are private money lenders that specialize in unconventional loans, such as hard money loans, bridge loans, fix and flip loans, and more.
Though traditionally used for investment projects, hard money loans are also great for people who need funds quickly — as in, within days. If you’ve searched ‘hard money lenders near me,’ you’re in luck. Keep reading to make your future real estate goals a reality.
A hard money loan is a short-term, unconventional form of financing that private lenders issue in exchange for collateral in the form of a hard asset instead of a borrower’s creditworthiness. Whereas a traditional mortgage is backed by a borrower’s ability to repay a loan over 15 to 30 years and, partially, by the home’s value, a hard money loan is backed almost exclusively by a hard asset’s current or potential value. The purpose of hard money loans is to equip investors with the capital they need to earn a profit off the property and repay the loan quickly.
Like banks, hard money lenders lend money to people who need funds. However, the similarities end there. Hard money loans differ from conventional loans in three major ways: the approval process, the length of the terms, and the loan’s purpose.
When applying for a traditional mortgage application, you would go through a lengthy, in-depth pre-approval process. During the process, the lender would consider everything from your most recent paystubs to your previous two years’ tax returns to your spending habits. The lender would also take a deep dive into your credit history and borrowing behavior, among several other things. For a traditional home loan, the whole lending process, from the date you submit your application to close, can take anywhere from 30 to 60 days.
On the other hand, hard money lenders, Florida, are interested in one main thing: the value of the property in question. If the asset has the potential to turn a major profit, receiving approval is likely. However, the lenders may still check your credit history and your track record of completing projects to ensure the property will see the ROI you promise. If the lender approves you, you stand to receive funds within 14 days, though sometimes fewer.
On a conventional mortgage, the loan terms are typically 15 or 30 years long. On a hard money loan, the terms are considerably shorter, ranging from one to three years. Some hard money loans require repayment within as little as six months.
In very rare circumstances will private money lenders issue a hard money loan for a residential home that the borrower plans to live in. Rather, hard money loans are typically tools used by investors to either help pay for the new construction of a building or to rehabilitate a structure to increase its value to sell it.
Private lenders set the terms for their hard money loans based on the assumption that you will repay the funds within a short period. For this reason, the terms are stringent and often undoable for many non-investors.
For starters, the interest rates on hard money loans are significantly higher than those on conventional mortgages. Whereas a mortgage from a bank may come with a 3% to 4.5% interest rate, you can expect to pay anywhere from 7% to 12% interest — possibly more — on the loan principle. Many lenders also charge an origination fee of 1% to 3%.
In addition to a high-interest rate, hard money lenders often require sizeable down payments. This may vary based on your credit score, but lenders typically require between 10% and 25% to show you are truly invested in the project.
Then there are the short repayment terms. You may have between 15 to 30 years to repay the loan via monthly installments with a conventional mortgage. However, with a hard money loan, you typically have to repay the amount, plus interest, by the end of a one- to a three-year term, typically in one lump sum.
Unfortunately, there are many private money lenders out there who take advantage of individuals and investors who are desperate for quick funds. These lenders charge impossible rates and offer impossible terms, expecting borrowers to default. These are the exact types of hard money lenders you want to avoid.
Ideally, you will find a lender who has a long-standing reputation for helping investors realize their goals for affordable prices. These lenders offer the following:
At Gauntlet Funding, we are the type of private money lenders you want to work with. Contact our team via phone or email, or visit us in person, to get to know us and determine if we are the right partner for you.
How to Find Hard Money Lenders Near Me | Gauntlet Funding – Melville, NY