Hard money loans are short-term lending instruments which real estate investors can use to finance an investment project. These loan tools are often used for house flippers or real estate developers whose objective is to renovate or purchase a property, then sell it for a profit. Hard money loans are issued by private lenders rather than traditional financial institutions such as banks.
Unlike traditional bank loans, the ability to obtain hard money financing isn’t determined by the borrower’s credit worthiness. Instead, hard money lenders use the value of the property itself in determining whether to make the loan. We use appraised value to determine the value of the property. If a property needs renovation, we will use as-is and after-repair values.
The purpose of hard money lending loans is to allow a real estate investor to purchase or renovate an investment property as quickly as possible. No credit score or income doc is taken into consideration. As a result, these loans feature shorter repayment terms.
Low Rates, Quick Approval, And No Documents Required.
These types of loans help you to keep your financial information to yourself without having to share it all with your lending institution. Since this type of mortgage loan allows you to bypass some of the paperwork that is typically associated with real estate loans, these loans typically result in higher interest rates and fees.
Despite its name, there are still some pieces of paperwork you will generally need to supply with this type of loan. For example, the lender may still require a credit report in order to determine your current credit score. In addition, the lender will want to get an appraisal of the home in order to make certain the amount of the loan is worth the value of the home. It is possible to obtain one of these loans without this paperwork as well, but it is generally much more expensive.