Looking for a short-term loan to purchase or renovate a property? A hard money loan may be the option you need.
These loans offer fast funding, often without requiring a strong credit history.
So what exactly are hard money loans? And what are their pros and cons?
These are the questions we’ll answer in today’s post so you can choose a hard money lender in Atlanta for your needs.
What Is Hard Money Lending?
Hard money is a way for you to borrow money outside of traditional mortgage lenders. Instead of loaning from commercial or local banks, you can receive loans from individuals or investors.
These lenders will give you a loan based on your collateral property.
For many, putting up collateral for a hard money loan is more attractive than qualifying for a traditional loan based on their income and credit history.
Even with an A+ credit history and solid income, traditional lending is a long and slow process. And if you have any negative marks on your credit report, it can take even longer to obtain a loan or you may not qualify for a mortgage at all.
On the other hand, hard money lenders are not as focused on your ability to repay. They know that if you are unable to repay, they can recoup their investment by taking the collateral and selling it. This way, your collateral is more important than your financial history.
The Pros of Hard Money Lending
Hard money loans are short-term loans lasting from one to five years.
They are advantageous when you need the money fast to purchase an investment property. As long as your collateral property is strong, you can get a loan very quickly.
After you close a deal with a hard money lender, subsequent deals should close even faster. This is especially valuable in hot markets when competition is fierce and you need a quick close.
Hard money loans are also attractive because of their flexibility. Since you’re often dealing with individual investors rather than large institutions with strict policies, you can sometimes negotiate loan terms, such as repayment schedules.
Finally, the ability to get approved is the biggest benefit. Instead of a loan officer going over your application with a fine-toothed comb, hard money lenders are primarily seeking strong collateral. They are looking for loan-to-value (LTV) of 50 percent to 90 percent to give themselves the best chance to sell your collateral quickly if they ever need to.
These are a few of the ways hard money loans are better than conventional loans.
The Cons of Hard Money Lending
The obvious drawback to hard money lending is the loss of your collateral if you are unable to pay. However, traditional lenders are less likely to decide to repossess your home; they don’t want a large inventory of homes they need to sell at reduced prices.
Higher interest rates are another drawback to hard money loans. Since the loans are short term, investors are looking to earn on their investment through 7 percent to 15 percent interest rates.
These loans have higher interest rates because hard money loans involve more risk compared to a conventional bank loan.
Find a Hard Money Lender in Atlanta, GA
Check your options when searching for a hard money lender in Atlanta, and you may be able to secure lower interest rates than what is found elsewhere. The Atlanta real estate market is very competitive, so it shouldn’t be difficult to find a good deal.
Getting a hard money loan makes sense if you want a short term loan to flip an investment property. You can improve the value of the property and sell it. Then repay the loan and keep what is left as profit.
If you enjoyed this article, please check out our helpful step-by-step guide to getting hard money loans in Atlanta.