A hard money loan comes from a private lender and is backed by a tangible asset with shorter terms and higher rates than a traditional mortgage.
How Do They Work?
This is a way to borrow money to invest in real estate without going through a traditional mortgage lender. Hard money lenders are not concerned as much with your credit score and your ability to repay the debt. Instead, they are concerned with the collateral you are using to secure the loan. If you end up not paying the loan, the lender will repossess the property and sell it, getting their money back.
Do You Need a Hard Money Loan?
This type of loan is your best option if you are unable to obtain traditional funding for real estate. Since the focus is on the collateral’s value, these loans close quicker than traditional loans.
Plus, once you establish a relationship with a lender, it can be easier to get funding in the future to close deals that other people can’t. Loan agreements are typically more flexible than traditional ones, meaning you may be able to tweak repayment schedules and other features that a traditional lender won’t.
Is It Worth It?
Of course, these loans are not perfect- a hard money loan does have a few disadvantages that come with it.
Primarily, there are extra costs associated with this type of loan. The interest rates are typically higher, and you may be expected to pay closing costs and/or other fees in order to obtain funding.
Plus, shorter time frames are riskier. If something happens that causes the timeline to be delayed, you may end up paying more interest or have interruptions in cash flow.
Getting a Hard Money Loan
If you need some cash flow for your business and you’re having difficulty getting a traditional loan, you might want to consider a hard money loan. Contact Jasema Capital for assistance in exploring this avenue for funding.