Purchasing property can be a long, complex process, especially if you’re selling as well. There are many options available when it comes to lot & land loans, but not every offer may meet your needs.
Hard money loans are designed to facilitate these types of transactions and offer advantages that traditional mortgages can’t. Could a hard money loan be the perfect financing option for your situation?
What is a Hard Money Loan?
Traditional mortgages typically have long approval processes; in fact, it can take over a month to get an answer from a traditional lender. Hard money loans are designed to have quick approval times so you can get your funds fast.
How do hard money and direct private money lenders accomplish this? Instead of looking at your credit history, they focus on the value of the property used as collateral. This means less paperwork, less red tape, and a quicker overall process.
Why Choose This Type of Loan?
Hard money loans are an excellent choice for situations where time is of the essence. If you’re a commercial property investor, this may mean needing capital to take advantage of a time-sensitive investment opportunity.
Sometimes, a hard money loan is called a “bridge” loan because it’s often used to bridge the gap between investment and payoff. This sometimes occurs when buying and selling property concurrently. For example, a homeowner may seek this type of financing to cover the purchase of a new house if the old house hasn’t yet sold.
What Should You Keep in Mind When Applying for Hard Money Loans?
Due to the nature of this financing, you may pay a higher interest rate than with a traditional mortgage. The reasons are twofold: First, hard money loans typically last one to five years, which means lenders have less time to make a profit from their lending. Second, this financing is a higher risk since it doesn’t factor creditworthiness into the approval process.
What are the Benefits?
While speed is one of the biggest advantages of hard money loans, they have several other benefits to offer:
- Shorter term length
- More flexible loan agreement options
- Easier to get approved
The last benefit mentioned may be especially attractive to individuals that have problems in their credit history, such as bankruptcy. Since hard money lenders focus on collateral, people who would be rejected by traditional banks may still be able to get a hard money loan.
How Can You Get Started?
Capital Fund 1 is proud to offer hard money lending in Sedona for a variety of uses. To find out more or to start your application, give us a call at 480-889-6100 or contact us online.
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