When you’re repaying a hard money loan, you may struggle to decide whether it’s better to extend the loan or to pay it back as soon as possible. It’s crucial to weigh the pros and cons carefully before making a decision.
In this blog post, we’ll explore some factors you should consider when deciding whether or not to extend your hard money loan.
What Is a Hard Money Loan?
A hard money loan is taken against a property and is usually short-term. Unlike traditional bank loans, hard money loans depend on the property’s value rather than the borrower’s credit score or financial history. Borrowers are usually real estate investors who need to acquire or renovate a property quickly but don’t qualify for bank loans.
Reasons to Extend a Hard Money Loan
If you are unable to meet the monthly payment goals, you can think of extending the loan. This will give you more time to get your finances in order. However, it’s important to remember that extending the loan will also increase the overall cost of borrowing, so you should opt for it only if it’s essential.
You can also think of an extension if you need more time to complete a project. For example, if you’re renovating a property and unexpected complications arise, you may need additional funding to complete the project. Extending your hard money loan can give you the extra time and money you need to finish the job without having to cut corners you’ll be unhappy with later.
Consequences of Extending a Hard Money Loan
While extending the loan might seem tempting, you should also be aware of the consequences. First and foremost, extending your loan will increase the amount of interest you’ll have to pay. This can significantly increase the cost of borrowing and make it harder to profit from your investment.
Additionally, extending your loan too many times may signal to lenders that you need help managing your finances. This can harm your credit score and make it harder to qualify for loans in the future.
Another factor to consider when deciding whether or not to extend your hard money loan is the state of the real estate market. If the market is currently experiencing a downturn, you should avoid extending your loan. This is because selling your property for as much as you had initially anticipated can now become difficult, making it challenging to repay your loan on time.
Deciding whether or not to extend your hard money loan is a complex decision that requires careful consideration of several factors. If you’re unsure what to do, speaking with a financial professional is always a good idea.
Do you need a hard money loan or have questions about extending your current loan? Contact the experts at GW Private Capital today. We can provide personalized guidance and help you make the best decision. Visit our website or call us to learn more about our services and how we can help you achieve your real estate investment goals.