In America, the average person has about $38,000 of debt, not including mortgages. These loans are typically used for a wide range of purposes. And while some people may frown at debt, did you know there’s such a thing as good debt?
That’s because debt can help you achieve your goals sooner rather than later and even help you save more money in the long run. In this short article, we look at hard money loans for real estate and explain how they can help you save money.
They Allow You to Flip a House Fast
Hard money loans for real estate are designed to be much more easily accessible than traditional mortgages from banks. For starters, that’s because they don’t require you to produce tons of documents before you can qualify.
Instead, you offer the property you’re financing as collateral, and the lender doesn’t have to take a significant risk because they’ll simply repossess the property if you renege on the deal. Therefore, applying for a hard money loan is much faster (a few days), unlike banks or credit unions, which can take several weeks.
This allows you to act quickly anytime the perfect opportunity comes up, and you need extra funds. Acting quickly means you maximize profits. Therefore, taking out a hard money loan will leave you with a fatter pocket. Otherwise, the deal may fall through if you delay because you need more time to convince your bank you’re creditworthy or to scrape funds together from family and friends.
They Are Short Term Loans
Hard money loans for real estate are generally short-term (between six months and one year). Since you’re paying off the loan in a shorter time, it means you can significantly reduce your interest savings.
This is especially so if you’re renovating and reselling the property within a short timeframe. In contrast, traditional mortgages typically have loan terms of up to 10 years or even more. While these come with affordable repayments, keep in mind that the overall costs will increase significantly as more interest accumulates.
A hard money loan forces you to repay the loan as quickly as possible, ensuring that any profits you make are not canceled by interest.
So, hard money loans for real estate can help you save money due to their quick availability. This allows you to maximize opportunities and enjoy a greater ROI. Additionally, by paying off your hard money loan sooner, you can save on interest and collect more profit.