If are looking to flip a home or just get a loan for any type of fixer-upper house, you should be looking into hard money loan rates. What are hard money loans? Hard money loans are a type of private loan. No, this isn’t a loan from your mom or Uncle Scott. You get these loans from private investors and not from a bank. Why go to a private investor instead of the trusted and true bank loan? Here are a few reasons why.
- Not About Creditworthiness
The first idea is that loaners aren’t looking at your credit score in order to decide if its worth it to invest in you. They are looking at the property that you’re trying to get the investment for in the first place. The value of the property is the priority when it comes to deciding if the loan is worth it to the investor. What they look at is the “after repair value.” This ARV is the estimate of value that the property will be worth once you’ve finished working on it. If the house isn’t worth it after all the work, why bother putting money into it?
- Quick and Flexible
Going along with that, there is not a lot of flexibility when applying for money from hard money lenders. You don’t have to go through extra procedures and red tape that you would for a bank loan. In fact, there approval process can be as sort as a couple weeks. From the time you request the loan to when you get it could take only 30 to 45 days. Plus, some factors like the hard money loan rates or the payment schedule are more negotiable than if it was a loan from a bank and you can get your money in a faster and more convenient fashion.
Adding to that, collateral can also be something up for negotiation. For instance, the usual collateral is the property itself. That said, you might find that the investor is willing to talk out the agreements of the loan. Perhaps you could use personal assets instead of the house. It’s up to your and your specific investor.
If you are looking to flip a home or work on a house that needs upkeep, a hard money loan may be the right solution for you.