If you’ve never heard of a hard money loan before, you may be wondering what exactly it is and the difference compared to a typical loan you would get from a bank. You’re in luck! In this post, we’ll cover the very basics of Hard Money loans- why they’re an important option for certain financing needs and how you can apply to get one!
First things first, a hard money loan has 3 main elements that make it unique:
Its Short Term
Since the amount of the loan given is based on the value of the real estate it’s being secured with, it can be smaller in size and paid off much more quickly. Rather than a loan that can drag out several decades, the hard money loan can be paid in just six months all the way up to five years plus. They are usually set up with interest-only payments and then one lump pay-off sum at the end or, the same as traditional loans with principal and interest payments – so there’s that added benefit and flexibility for borrowers.
Its Funded By Private Investors
Private investors are able to provide funding much quicker than conventional loans can be funded through lenders such as credit unions or banks. This 10-day timeframe provides a significant advantage for real estate investors looking to outbid competitors which have a turnaround time of around 45-days at least.
It’s Secured by Real Estate
The above benefits are allowed because the loan is secured by real estate. That means the hard money lenders can overlook borrower issues since there is capital backing the interest on the loan. As we mentioned above also, you’ll be given a loan based on a property’s value – so this real estate backing plays a key role in the quick and easy hard money loan scenarios.
Need a loan? Looking to get into the Fix and Flip market? Talk to a trusted member of the team at Sachem Lending. We have years of experience and can provide creative solutions that meet your financing requirements.