In the first quarter of 2018 Americans collectively owed over 8.94 trillion dollars in mortgage debt. This is not surprising since most people want to own a home at some point, whether they plan to live in it or use it as an investment.
A good portion of the money Americans owe is tied to a loan from the bank since this is the most popular route. However, it is not the easiest avenue for getting a loan especially if you have bad credit.
If you do not have the option of going to the bank to get a loan, then the next best thing is a hard money loan. Here is a look at the most important things you need to know about how hard money lenders structure loans.
1. Interest Rates
Hard money loans are typically a lot easier to get than bank loans. Approval for a bank loan can take up to forty-five days.
To make matters worse you may not even get it if your credit score or financial history does not meet the bank’s requirements. Hard money loans eliminate this issue by giving you fast delivery with less red tape.
You can get a hard money loan in one day to a week even though the interest rates tend to be a bit higher. However, it is often worth it if you know how to structure your finances.
2. Interest Only Option from Hard Money Lenders
The payment schedule for a hard money loan can be quite flexible. You may only have to pay the interest on the loan in the very beginning.
This allows you to have some flexibility to set your finances in order or seek out ways to pay the principal amount when it becomes due. Ask your hard money lender about this option especially if your finances are tight.
3. Balloon Payments
Although you may not have to pay the principal on the loan right away at the end of the term of the loan you will be asked to do a balloon payment. Since the entire principal on the loan will become due, you will need to decide how you will pay it off.
Based on your financial situation you can consider saving to pay it off, refinancing the loan or selling any property that you used the money to buy.
4. Repayment Periods
The repayment period for hard money loans tends to be shorter than the bank.
Typically, you will have to repay the loan in a year. However, you may be able to get the loan extended beyond a year in many cases, so ask your hard money lender about this.
A hard money loan is a great way to get the cash you need quickly and easily. If you have not qualified for a bank loan or you know that you will not qualify then a hard money loan is your best option.
Hard money lenders know that getting financing may be difficult for you and so they structure their lending process to have as little red tape as possible.
If you would like more information about hard money loans, then please contact us today!