Hard money loans, also known as private loans, have several advantages that make them more attractive than traditional lending options. As you enter the house flipping industry, it’s imperative that you are competitive. By having funds lined up quickly, you can take advantage of the best investments.
Here are three advantages to hard money real estate loans.
- Fast Approvals and Funding
Banks don’t like to offer funding for fix-and-flip properties because they prefer longer terms with more paid interest. Also, they generally are not willing to pay for repairs and renovations. To further complicate matters, it takes a long time to be approved for a bank loan, which means you can lose several properties in the process.
Private lending has a much shorter timeline. Lenders base their decision on the liquidation value of the property so they can make decisions quickly. This allows you to be competitive and take advantage of the best investments.
- Fewer Hoops to Jump Through
Another advantage to bridge loans is that they have fewer requirements. Not only does this speed up the approval process, but also the loan is more likely to be approved.
Banks have a long list of requirements, and some of them can be unreasonable. Additionally, banks pay attention to red flags in your background such as foreclosures, short sales and loan modifications.
Even if you have some blemishes on your record, a hard money lender will still loan you money. There may be additional terms you have to meet, such as having enough equity in the property or a larger down payment, but you’re still likely to get a loan.
- Flexible Term Structure
Traditional financing is rarely accommodating. The banks tend to follow a strict set of rules regardless of who you are. And, most loans are structured in a way that is beneficial for the lender and not the borrower.
Hard money real estate loans are far more flexible and don’t have the all the hidden fees of traditional loans. You can work with the lender to structure repayment terms that work for the both of you. Also, many lenders will let you to pay off the loan early without being charged a prepayment penalty.
First Equity Funding has a team of hard money lenders that care about your success and want to see you do well. Call us today to learn more about our four-step process to working with real estate investors.