When talking about taking out loans, banks are the first place that comes to mind. But there are also other types of lenders that you can trust for your property loans. There are private individuals or companies that lend money that focuses on real estate transactions, such as those that offer hard money loans.
Hard money lending is more focused on the collateral that the borrower can offer. So, if you have a property with enough value to be your collateral, these hard money lenders will usually approve your loan. However, unlike any other loans, hard money loans are only short-term and typically last for a year or two. This type of loan is perfect for those who are looking for a quick loan transaction.
HARD MONEY LENDING RATES
If you are complaining about the high rates of traditional loans, well, HARD MONEY LOAN RATES are even higher. Since it’s fast and easy transactions, the rates are expected to be higher for the borrower to quickly return the money.
As of 2019, the standard interest rates for hard money loans is ranging from 7.5 up to 15 percent, which is paid monthly. It’s really costly and risky, so you have to be cautious when choosing your lender.
Moreover, other than interest rates, hard money lenders usually charge additional fees. They call the fees points which they collect to deal with the administrative costs and other matters. You have to pay 2 to 10 percent of the total amount of your loan upfront for the lenders to approve your loan application.
THINGS TO CONSIDER TO GET GREAT RATES FOR HARD MONEY LENDING
EXPLORE OTHER OPTIONS
Unlike traditional lenders, many private hard money creditors have different requirements, rates, loan programs and practices. Therefore, applying to more than one lender will give you a chance to explore other options. Don’t limit yourself to only one because there are plenty of choices to get suitable rates for you.
IMPROVE CREDIT SCORE
Even though credit scores are not required for hard money lending, there is a big impact on the lenders when you have clean credit history records. It will give them the impression that you know what you’re doing and might get lower rates.
SAVE FOR THE DOWN PAYMENT
Sometimes bringing a high amount of down payment could be risky, but it can also be beneficial. When you provide a higher down payment, chances are that the fees will be lower. So, growing your down payment will lower the money that you’re borrowing as well as the charges.
Learn more here
Learn about how to qualify for a hard money loan here