Many people wonder what a hard money loan looks like as a funding option for investors. This type of loan is in high demand among investors because it usually comes with many different loan options. Lenders provide quick access to funds for respectable borrowers to close business and invest in properties.
Hard money loans are necessary for today’s real estate market. Many investors would not have the opportunity to enter the market if they did not have private lenders to help them. This is mainly due to the excessive underwriting requirements of conventional lenders. However, the speed of approval is another important factor in choosing the right financing option.
A lender can approve a hard money loan in a matter of days. It allows the investor to close a deal quickly and get the property they want ahead of their competitors. Plus, hard money lenders are willing to invest in properties that need repairs.
The flexibility of hard money loans is one of their most vital points and a big reason why so many investors choose this type of financing. Investors are interested in purchasing properties in need of serious repairs or in need of quick refinancing on real estate that they have already repaired and prepared for rental.
The terms of private money lending can vary widely from one lender to another. They also differ geographically, but the average interest rate drops from 7% to 12%. Loan origination fees are generally between 1% and 3% in all regions.
You don’t need to have a great credit score or provide excessive documentation and personal information to apply for a private loan. The property itself backs up the loan and serves as collateral.
Let’s go over some examples of private money lending, so that you get an idea of what they are used for and who is benefiting from them.
Investors who work with commercial real estate always look for the fastest possible closing option. Private loans allow them to purchase commercial properties within days of their application.
For example, RBI Mortgages is a Miami hard money lender which offers competitive rates and rapid closure. Their essential lending criteria include fixed rates starting at 8.5% with a maximum of 60% LTV. There is no prepayment penalty and you only pay interest on the monthly installments. A balloon at maturity and loan amounts ranging from $ 100,000 to $ 10,000,000 attract many investors.
The types of property that this type of loan is used for include hotels, offices, multi-family apartment buildings, warehouses, restaurants, and other types of commercial properties. Several types of business loans are available, including purchase, refinance, and cash out.
Also known as bridging loans, residential loans are a perfect solution for second homes and real estate investments. Typical borrowers for residential loans are those who need cash to invest in a second home or need a quick closing.
At RBI Mortgages, the loan term for residential loans can be one, two or three years. Fixed rates start at 7.75%, and like business loans, there is no prepayment penalty and payments only include interest. Loan amounts start at $ 75,000 and go up to $ 10,000,000.
This type of loan is suitable for properties like condominiums, multi-family homes, single-family residences, buildings with two to four units, condo-motels and many more. Three types of residential loans are available: cash, purchase and refinance.
Repair and return, repair to rent
Investors, new and experienced, are always on the lookout for the best property on the market. They usually need the cash quickly, so they buy one as soon as it goes on sale, especially for residences good for repairs and flips. Investors looking to buy a property to repair and remodel or rent out find these loans very useful.
Key lending criteria include fixed rates that start at 8.5%. The term ranges from six months to two years and the loan consists of an LTV after repair of up to 70%.
With loan amounts ranging from $ 75,000 to $ 10,000,000 and flexible terms, investors find this type of loan extremely useful. The types of properties for these loans include townhouses, buildings with two to four units, single family residences, etc. Withdrawal, refinancing and buying are available as loan variants.
Get a loan
The first step to getting a loan is usually to complete an online application and wait a short period of time (usually 24-48 hours) for a lender to respond to you. Once the loan is approved, the average time to close is five to ten days for residential loans and ten to fifteen days for Fix and Flip and Fix to Rent loans. For commercial loans, the approval time depends on environmental conditions, appraisal and title.
Applying for a loan requires much less documentation than a traditional loan application would require. Approval takes less time and comes with other benefits, including flexible terms. These are all valid reasons for real estate investors to choose this financing option.