What Is a Hard Money Loan and What Can It Do for You?
Hard Money Loan
According to the Home Purchase Sentiment Index compiled by Fannie Mae in October, current prospective buyers are not feeling confident about the future of the housing market.
Still, they have reported that they’re prepared to wait until things improve. For this reason, many sellers are also contemplating options such as hard money loans to help them achieve some financial goals until they can list their properties again with the confidence that they’ll be bought up quickly.
However, reading this might beg the question, what is a hard money loan?
Understanding Hard Money Loans
In essence, hard money loans are non-conventional lending products secured by real estate assets.
To a certain extent, they can be considered debt instruments similar to mortgages because they feature a note securing repayment employing a hard lien.
Mortgage lenders or retail banks do not issue these loans; groups of investors or commercial banks mostly handle them.
How Hard Money Lending Works
This segment of the financial lending industry operates at the edge of the real estate market, but its process borrows a few aspects of mortgage lending.
Borrowers need to qualify, and they have to submit a single credit check, but the loan itself is not reported to the credit bureaus.
The star of the hard money lending show will always be the subject property; if you have plenty of unencumbered equity in your home or undeveloped land, your chances of getting a solid hard money loan will be pretty good.
The appraisal will determine the amount that can be obtained, and the loan-to-value ratio can be as high as 100% in some cases.
Reasons to Get a Hard Money Loan
Being able to rely on the strength of your property is an important aspect of the American Dream.
Getting a hard money loan involves tapping into the equity you worked to build, and you can use the proceeds from the loan for just about anything.
A hard money lender will not question whether you intend to improve your house or start construction on an empty lot; nonetheless, you must remember that these are short-term loans.
Pros and Cons of Hard Money Loans
The streamlined process of hard equity loans makes them very attractive in an emergency, and you can continue enjoying the property during repayment.
The only disadvantage of these loans is that the terms may not be as favorable as conventional mortgages.
In the end, hard money lending is a sensible option to get some quick cash secured by your property.
If you are waiting for housing market conditions to improve, tapping into your equity could be a good idea.
Category: Loans
