A hard money loan company provides capital to individuals in the real estate business where the value of the property is used as collateral. Since they don’t consider the creditworthiness of the borrower, the cost of borrowing is higher than other lending institutions. The increased expense is a trade-off for the flexible repayment period – usually between 6 months to 2 years. If you want to renovate your property, you should get top-notch information about hard money lenders Los Angeles has to offer. So, how do hard money loans work? Read on and learn more!
Who needs it?
Hard money loans are common to real estate investors. Unlike banks, the lending company does not look at your credit history. It’s suitable for individuals who have limited options when it comes to real estate financing. If you have poor credit score but you have enough equity to secure a loan, a hard money loan company is the go-to option. This scenario is common to property owners facing the possibility of foreclosure.
If you approach a bank for a loan, you may be required to put down 20% of the purchase price. Likewise, if you go for a mortgage you have to put down 2% of the purchase price. In essence, this increases your monthly mortgage payment. When you find the best hard money lender, you can get up to 100% of the value of the property. The exact amount is based on the contract between the lender and the borrower. This means you’ll only be responsible for the monthly interest and origination fee to pay your loan in full. The interest rate will depend on the amount you borrow and the repayment period.
Quick approval process
When working with banks and other financial institutions, there is a lot of paperwork involved. It can take you several months to secure the traditional mortgage. With a hard money lender, there are fewer hoops to jump through. Since the asset backs your loan, the lender will only be interested in the value of your property. The approval process can take a few days to a week. Most companies bypass the regulatory hurdles during the loan application process. It’s worth mentioning that you don’t have to prove you have a reserve to secure future payments.
Great for starters
While hard loans may not be suitable for every investor, it’s a great place to start … Read the rest