When Should I Consider A Hard Money Loan?
The reason a person should get a Hard Money or Private Loan should be for the speed and ease…never desperation. The value of getting the money now should greatly exceed the cost of borrowing it. By seeking a hard money loan over a conventional loan, you will be trading speed and ease for cost. If you need money quick and are buying or refinancing an investment property, hard money is an option to consider. Hard Money loans require a substantial down payment or equity position in a piece of real estate. Fix and Flip, Investment rehab, Bridge loan are all good uses for Hard Money. The best use of a Hard Money loan is to use it like cash to take advantage of a great real estate deal. Bank foreclosures, Probate sales, distressed sales, etc. where cash is required to take advantage of the deal. If you are buying your primary residence, stick with the banks and conventional lenders.
Hard Money loans generally require a substantial down payment or equity position in a piece of real estate, but will overlook other things like employment history, tax filings, or credit scores. Great deals on real estate are available, but you have to be ready to jump on them quickly! Bank foreclosures, Probate sales, distressed sales, etc. require speed to capitalize. If you don’t have the cash, you don’t get the deal. Investors many times have a lot of the money, but not all of it and that is when a Hard Money Lender can jump in and fill the gap.
Private loans are short-term, typically lasting 24-months or less and are generally non-owner occupied real estate as the primary collateral. This can include single family homes, multi-plex, condo, apartment, or a commercial property.
Common uses for Hard money would be for a Fix and Flip loan, a Rehab Loan or a Bridge Loan. They are often used when buyers want to purchase a property with the intent to fix and flip, or sell for profit, or refinance down the road.