Hard money loans can always come to your rescue if you are running low on cash and still want to complete your real estate project on time. This type of loan, also known as a bridge loan, is not that easy to find. They are usually issued by private lenders and not mainstream financial institutions like local commercial banks.
You can visit dfw-hardmoney.com today if you are looking for hard money loans to finish your real estate project. When reaching out to a hard money lender, you should look out for the following pro and cons of lending money.
The pros of taking hard money loans
There are a number of benefits you get from securing hard money loans from private lenders:
Hard money loan is fast, which means you can secure the loan in weeks or days. This can speed up the process for a large development project when it takes the shortest time to secure the loan.
Since you will be dealing directly with the private lenders, you can negotiate for terms of payment and the collateral for the loan.
No need for credit score:
When applying for a loan from conventional banks, they have to check your credit score, debt to income, LTV ratios, and other indicators before issuing the loan. However, hard money lenders are only concerned with the asset or property and not your credibility as the borrower.
Hard money removes the middleman from the chain of securing a loan. It gives you the convenience of supplying the lender with income documentation, bank statements, and tax returns.
The drawbacks of lending hard money
When you are lending hard money from most private lenders in your locality, you should be ready for these drawbacks.
High cost of borrowing
Hard money may be an easy way to find loans to complete your building. However, you should be ready for the high cost and interest rate when paying back the loan. You are likely to pay back at a rate 10% more than the conventional loan from your usual financial institution. The original fees, loan servicing fees and closing costs are likely to cost you more than expected.
Short repayment period
You should avoid hard money loans for your real estate project because of the short repayment period the lenders offer. The purpose of these loans is to help you get your project to the market as soon as possible, and that means the repayment period is shorter than what your conventional mortgage lender offers.
Therefore, when you borrow hard money for your real estate project, you should figure out how long it will take the project to become profitable. This is the only way to ensure that you can repay your loan in a timelier manner. If it takes short period to repay the hard money loan it may not be easy planning your installments.