Hard Money Loans
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Are you looking for funds to make a deal on an offer? Hard money loans, also known as bridge loans, could help facilitate this through financing from Commercial Real Estate Loan Pros of St. Petersburg.
A hard money loan is usually supported by an asset, e.g., a business property that generates profit to repay the loan faster. Funding is usually from private individuals or private institutions. These types of loans typically help investors looking for short-term financing deals, for instance, fixing and flipping deals to get money quickly and repay the debt.
How hard money loans work
A lender looks at several factors before approving your loan. A good credit score is usually not among these factors. These factors include: home equity, loan-to-value ratio (LTV) and debt-to-income (DTI). Due to fast approvals, the loan has a high-interest rate, not forgetting the addition of origination fees. Generally, bridge loans are often more expensive since the lender takes high risks when giving the loan.
Are hard money loans legal or illegal?
Bridge loans are legal. Many lenders are licit investors or institutions looking for land or building projects to finance for a reasonable profit. However, a few lenders in the market take advantage of new investors’ lack of experience. You should, therefore, be diligent when looking for a private lender. As a borrower, you should know that lenders have restrictions on deals they would like to fund. For this reason, you should know which type of loan a lender would not accept.
Differences between hard money loans and traditional loans
Bridge loans have between 6 to 18 months compared to traditional loans that amortize above 30 years. Bridge loans also have interest rates that are up to 10% higher. In addition, traditional loans are usually supported by collateral and a good credit score, while bridge loans are only supported by collateral.
Advantages of hard money loans
The application process closes quickly as this is very key in investment as people with liquid cash tend to get the best offers. Compared to traditional loans, you would save a lot of time in the financing approval process. Loans are supported only by the collateral, and in most cases, the borrower is not personally responsible for repayment. Poor credit scores are not necessarily a reason for your loan to be denied. Bridge loans also require a lower loan-to-value ratio compared to traditional loans.
Disadvantages of hard money loans
Hard money loans have high interest rates than other loans. Additional charges such as origination fees are typical. As a result, you may end up losing your property if the loan defaults. In addition, the financing can end up being expensive if you do not finish payments on time. In case of any unexpected events, the loan may not complete the project as the loan amount is usually the contractor’s estimation.
Hard money loans could be of great help to your business if you do not qualify for traditional forms of funding. Mainly because you will get a faster approval time hence securing your investment opportunity. For any guidance or inquiry, please talk to Commercial Real Estate Loan Pros of St. Petersburg.
There are so many areas or regions where we offer these services with most of them being cities.
However, if you need any of these services, you need to contact us. The list below comprises the areas where we offer these services.