What is hard money? Why and when should it be used?
1. Hard money
Sometimes you need a mortgage, but the traditional lenders are either not willing to advance or slow at approving. One of the options available to meet this need is hard money. This is a way to borrow money without going through the traditional mortgage lenders. The money will come from investors or individuals who advance loans based on a collateral, which in most cases, is a property or part of it.
Credit score
You find that most of the loans will need a proof that you can repay. This is normally determined by the credit score as well as the income level. For those with a good credit score and have a solid history of borrowing and repayment, their loans are approved relatively fast. At times you may find that the process of getting the money approved, especially by the traditional lenders, can be painfully slow. It is even worse when your credit rating is negative or the income is hard to verify or is low to guarantee regular and adequate repayments.
Hard money is mostly used by those who have low credit score, the type of borrowers whom traditional lenders are slow in approving. Hard money lenders, their lending is based on a collateral, a property that will secure the loan. If at any point you are unable to repay, the lenders will get their money back through selling the collateral. With hard money, it is not about your credit score or the financial position, it is the value of the collateral that matters.
Short term loans
Hard money is available on a short term basis. It lasts a period of one to five years. These are the types of loans that you would not want to keep for long as they come off as very expensive. The interest rates which are charged on these loans are higher than the traditional loans, keeping them from long leads to repaying large amount of money.
Why Use It
Hard money is expensive but at times we need to use it, mainly due to the fact that we do not have a solid credit history or need money quickly and the traditional lenders are taking long to approve. You may be in a bad situation where your income may not sustain a loan repayment at a given time but there are chances of improvement in future. Hard money will come in handy as the lenders are more interested on the collaterals. If you have a property that can be attached, this would be the best option.
We are not short of options when we want money to finance a mortgage. Hard money, though expensive, is a type of lending that presents an opportunity if we have collateral.
Give us a call today and let us help you with your hard money needs!
561-609-6699
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