If you are looking into investing in real estate, you might hear the term “hard money.” This is a term that you will need to know and something that you need to learn more about.
There are places where you can learn more about what this is. You can call DFW Hardmoney and they can explain things for you. They could also help you with a hard money loan.
This article will help you to learn more about the term hard money and what it means for you as an investor. It will give you some information that you might not have known before. You can also do research to find even more information.
Information About Hard Money
- Hard Money is a Type of Loan – This is a short-term loan, usually six months to three years. These loans are usually used for long-term projects that need funds at the beginning of the project. These loans are used when other financing options are not available to you.
- Typically Used for Real Estate Investing – This allows the real estate to be used as collateral. If you don’t pay your loan on time, you will lose the real estate. This is good for the investor because they usually have no other guarantee.
It is difficult to get a loan with the amount of funds that you will need without collateral. Hard money loans make this process easier. You can get the funds you need because of the type that it is.
- It is Secured by the Value of the Property Being Purchased – These are not based on the investor’s credit score; they are based on the value of the property being purchased. This makes it easier to qualify for the loan. This is especially true if the project that is being financed will generate the funds to pay for the loan payments.
- They Are More Expensive – These loans are more expensive because they are at a higher risk than others. The interest rates and other fees will be more than a traditional loan because of the short term and the lack of other collateral. The terms can be more flexible, but the fees will be higher than usual.
- They Will Also Charge Points – Points are a percentage of the loan amount that is paid up front. Learn more about points here. These points can be used to pay some of the other fees that you might incur. This is also used to compensate for the higher risk of the loan.
You want to make sure that you are informed about points before you sign any paperwork. This can be a large upfront cost that you weren’t expecting. That’s another reason that you need to read your agreement carefully.
- Hard Money Loans May Require a Personal Guarantee from the Borrower – This is a legal agreement in which the borrower agrees to pay the loan in full if the property can’t be sold: https://www.fctd.com/blog/hard-money-loans-personal-guaranty. This is more common when the borrower has few other means of collateral or has bad credit. This is something the lender does to make sure they don’t lose their funds.
- They Don’t Have the Same Laws as Traditional Loans – This makes it especially important for you to find a reputable lender. Make sure that you do your research and read all the reviews so that you know they will not try to take advantage of you. You also want to make sure that you read the agreement very carefully before you sign it.
- A Great Option for Who Need Funds Quickly – You can probably get your funds in as little as one or two weeks. If you work with an experienced lender the time can be even quicker. This is helpful if you would not qualify for a traditional loan.
- Have an Exit Strategy – Before you take out hard money, make sure that you have an exit strategy. You want to make sure that you have a strategy to pay the loan in full so that you don’t lose your investment. This will also include how long you will have to pay the loan off in full.
- Work with an Experienced Hard Money Lender – Do your research – check all the reviews. See what people are saying about the lender. You want to read all the information that you can find about the lender so you can avoid them taking advantage of you.
A hard money loan is one that is different than a traditional loan. It has a shorter term and higher interest rates. It is usually for real estate investments that you need money for quickly.There are lenders who only do hard money loans. You need to be careful and choose a reputable lender. Read all the reviews and read the agreement carefully before you sign it.