Finding the right real estate deal may seem like a most daunting task to an inexperienced investor but more seasoned ones know that there is an excellent alternative to traditional lending institutions – private or “hard” money. In fact, hard money offers some distinctive advantages to the funds provided by banks, savings & loans, and other traditional lending institutions. Here are just three:
Hard Money Advantage #1: Enhanced Versatility
The most advantageous aspect of hard money loans is their versatility, since the loans are made by accredited investors – who make decisions about their money on their own - there is no need to jump through hoops of traditional lending institutions with their subjective loan criteria and their loan approval boards. Instead, if a lender and borrower can agree on terms, the deal can be consummated in a legally binding and very secure way.
Hard Money Advantage #2: Superior Security
Hard money loans are always secured by a first deed trust with a relatively low loan to value ratio. While these facts certainly benefit the lender, they are also useful to the borrower as he can be sure that his payments will be at an affordable level. Secondly, hard money loans are consummated with all the same protections as a traditional mortgage including appraisals, inspections and legally binding contracts.
Hard Money Advantage #3: Lowered Costs
Most homeowners don't realize the amount of fees that are built into the closing costs of the home they are about to buy. The bank just calls them and tells them to bring a check. While these fees are “disclosed” in a mass of paperwork at the closing, they are simply identified and not really explained. This is how traditional lending institutions make the bulk of their money in real estate. Hard money loans, on the other hand, are made by investors who will see their returns come from the payments on the loan over time. You are always aware and in control of the origination fees, and can shop around for the hard money lender who will charge you the least amount of points and processing fees. The result is simply that less money is required to consummate the deal.
For more information on financing investment properties with hard money to meet your exact needs, please contact your local real estate professional or a private money lender. They will have the right answers for any situation.