Do you think about home improvements or home renovation?
You might have come across a lot of real estate investors who are in love with hard money loans. But at the same time, hard money lenders usually come with higher interest rates. The process is undoubtedly faster.
Taking a loan from conventional financial institutions like banks can be more cost-saving as you need to pay lesser interest.
But suppose you need to close a deal really soon. Otherwise, you will lose the deal. In this case, you can not wait longer to complete the lending process of a conventional financial institution.
You might encounter a question here, “why should you use hard money loans for home improvement?”
Benefits Of Hard Money Loans
Yes, hard money loans do have higher interest rates when they have shorter terms. That is why a lot of people think; ultimately, it is not making any sense. However, hard money loans can actually help you in a lot of instances.
So, when you are the questions;
Why should you use a hard money loan for home improvement?
You first know what their benefits are.
#1 Speedy And Flexible
At the same time, hard money loans are fast and flexible. These are the two qualities that real investors cherish. Usually, it takes around 3 days to close hard money loans. Once the requirements are met, you can get the loan within one day.
For real estate investors, especially when you are looking to renovate a property, this speedy process of a loan is required. When you get an exceptional deal and the seller is a little anxious, you do not get enough time to follow the process of traditional bank loans.
Hard money loans can save you here.
#2 Perfect For Renovation Financing
For renovation financing, hard money loans are ideal. In most cases, the hard money lenders cover the entire cost of renovation and also release the funds in a series of draws that is based on mutually agreed draw schedules.
It means you are actually getting the funding for renovating properties exactly when you need it the most.
#3 Bad Credit Does Not Harm The Deal
Hard money lenders always focus more on the collateral property instead of on the borrower. Even though you have bad credit, it is not going to bother a hard money lender.
Here they just charge higher fees and interest. Top higher-risk borrowers, the hard money lenders, also lend at a lower LTV.
#4 Flexible Down Payment Options
Another major benefit of hard money loans is the lender often does not simply care about where your down payment is coming from. You simply can borrow it from any of your friends, or you simply can pull out some cash from your credit card.
As the focus of hard money lenders relies on the collateral, they do not care much about the down payment. On the other hand, conventional lenders usually do not allow any part of the down payment to be borrowed from any weather, even not from your family members.
$5 Flexible Options For Property Type
You might be surprised to know that hard money lenders are also ready to consider unique properties, which can make conventional lenders a little anxious when you are thinking about renovating a property that can be almost anything and everything.
Here, you do not need to worry about whether you will get the loans for that particular property or not as long as you have access to hard money lenders. They usually consider a wider range of properties.
$6 No PMI
Unlike all those traditional lenders, hard money elders do not charge any OMI or private mortgage insurance that takes some of the strings out of their high costs. It means you are also free from mortgage.
Especially when you are considering renovating any property, this is the benefit that you really can take advantage of.
The Final Answer
So, you see, with hard money loans, you are also getting all these benefits. When you are planning to buy an old house and want to renovate it and then sell it, you should consider hard money loans.
In most cases, the owner does not wait for longer; if they get a good deal, they will not wait for your loan application to get approved by a traditional bank. Here you need a fast solution, and hard money loans are the best.
So, we will recommend you opt for hard money loans when you are thinking about fixing and flipping homes.