In need of a real estate loan that is an alternative to traditional or bank mortgages. Private hard money loans serve the same purposes as other types of mortgages but have much more lenient guidelines.
What Are Private Hard Money Loans?
Private hard money loans are real estate loans funded with private capital. Private hard money loans typically have higher interest rates and costs, but they are much easier to obtain than other mortgages. Private mortgages are equity-based loans and borrowers do not need to meet the same rigorous qualification requirements as bank, government or traditional mortgages. The more equity in a property, the easier a private money loan can be obtained.
Many property owners and borrowers borrower private money loans opposed to jumping through all the lending requirement hoops of banks and traditional lenders.
How Do Private Hard Money Loans Work?
Private Hard Money loans work similarly to traditional mortgages, they typically require that a monthly payment is made by the borrower and similar documents secure the loan, such as a promissory note and trust deed. Borrowers who take out private hard money loans can expect to pay higher interest rates and the loan repayment terms are typically shorter, 12 to 24 month repayment terms.
On the other hand, traditional financial institutions like banks and credit unions will require proof that you need to be able to repay the loan. That means you’ll have to provide proof of income, such as pay stubs and bank statements. They’ll also need other financial details, such as the assets you own, your monthly expenses, and debts. Additionally, you need an excellent credit score as this shows you have a history of good financial behavior.
With hard money loans, the application process is simpler, requiring much less paperwork. As long as you can provide sufficient collateral, the lender is willing to finance your project in a relatively short time. Sometimes, even if you qualify for a traditional loan, you might opt for a hard money loan just to avoid the hassle!
In a nutshell, this information covers the basics of hard money loans. They may be right for you if you need fast financing to capitalize on an investment opportunity.