For individuals that are interested in flipping homes, hard money rehab loans are one of the best choices they can make. This is because while the home they are interested in flipping may require a lot of work, but this will be outweighed by the profit that comes with it. When going through a lender who is considered a hard money lender, these individuals generally have more knowledge of how rehab projects will require more capital, rather than the average lender who might not understand much at all on this subject. Here are three reasons why hard money loans are better suited for individuals who are dedicated to flipping real estate and need renovation lending services.
Hard Money Lenders Provide Different Lending to Their Borrowers, Including Interest Rates
Because hard money lenders understand the process in renovation financing, they are equipped to offer hard money rehab loans that may be different for the individual borrowing money than what they are used to. This includes interest rates that may begin at 18% or even higher. Those taking out these types of loans should be aware of this, but also understand that when working with hard money mortgage lenders, these professionals understand the process that is involved in flipping a home. By making use of these services instead of going through a traditional lender, they already have someone on their side who understands the difficulty of bringing a home up to code before putting it back on the market.
Hard Money Loans Have a Quicker Turn-Around Time Than Using a Regular Loan
For individuals who are attempting to secure a hard money rehab loan, they can rest assured that their lender understands time is of the essence, and who knows they need to get the ball rolling as quickly as possible. Hard money loans for real estate investors often do not take long in being approved, with the average time being one to two weeks. With this in mind, the lender works to quickly help their clients get on the track to getting their paperwork done for the loan so they don?t waste valuable time. Flipping homes is a business for many individuals, and loan officers know this. Thus, it is in their best interest to help their customers go through the process so they can find out the results and then proceed with their real estate.
Hard Money Loans Often Use a Property to Secure the Loan
In an effort to ensure the investor can get their money back if it is not paid, the majority of hard money rehab loans are obtained via a property and anywhere from half of the property to 30% in its equity. This gives the investor a sense of comfort, and allows them to feel protected in what they are doing. Flipping homes can be considered a risky venture, since there is not always a guarantee that the home will sell after being put on the market. Sometimes bringing a home up to code might be more expensive than people realize, and this can have an adverse reaction to their business. In the event this happens, lenders will be able to recoup their losses through having the property as collateral.
Hard money rehab loans are used especially for those who are flipping homes and need to make renovations. This might be because renovations will improve the quality of the home and result in a quicker sale, or simply to bring the home up to code. Those who are obtaining hard money loans should be aware of the varying interest rates, and remember to check them before agreeing to a loan. The benefits are that through working with lenders who understand this field, they are aware of the cost that will go into house flipping, as opposed to regular lenders who might not have any knowledge at all. They are also quicker to approve or deny, with a turn-around time of two weeks at most. Finally, these loans use a property as collateral, so individuals need to be aware of this factor as well, before agreeing to anything.