Is A Hard Money Loan Right for Me?
For real estate investors just starting out, sourcing your funding may be daunting. There are a variety of sources for potential investment funding: traditional banks, private individuals, your own capital, and non-traditional lenders such as hard money lenders.
Investors choose their lenders based on their current needs and qualifications. Do you plan on holding the property long-term or are you looking to flip the property? What kind of investment property are you purchasing or refinancing? Will you be occupying the property? All of these factors come into play when making your choice in acquiring capital. Out of these, one of the most popular choices for new investors is a hard money lender.
What Is A Hard Money Lender?
What exactly is a hard money lender? As stated in our previous blog entry, hard money lenders are lenders whose loans are backed by a “hard” asset, such as the property being purchased, instead of the borrower’s financial and credit history. As such, hard money lenders will look at the purchase price, any estimated repairs, and the after-repair value, or ARV, to assess an appropriate loan size.
Is It A Good Idea to Use A Hard Money Lender?
Whether or not a hard money lender is a good idea comes down to the individual’s goals. Do you need to close fast? Can you or do you plan on paying off your loan obligations quickly? Is your credit score lower than most banks will accept? Do you have a good relationship with a hard money lender who might be able to work with you a little more easily? Then Hard money might be right for you! However, if you have good credit and aren’t in a time crunch, it might be more beneficial to use a traditional bank for lower rates and a longer term.
The Pros and Cons of Hard Money
Pros for hard money loans include:
- Faster closings than traditional banks and institutions
- Ease of qualification due to limited financial information being required
- Different loan types depending on hard money lender (Single Family Residential or Commercial)
Cons of hard money loans include:
- Higher interest rates than traditional banks and institutions
- Shorter terms
- Typically requires a higher down payment
The Bay Mountain Capital Experience
Hard money lenders are able to facilitate the approval process by cutting out requirements employed by traditional institution. Most will also be able to work with borrowers in a more flexible manner than conventional banks. Whether you’re just starting your first flip or have been flipping for years, agility is required to be successful.
If you’re looking for a hard money loan, consider Bay Mountain Capital as your lender. Since 2008, we’ve been operating as the premier hard money lender in DFW and have expanded to Tennessee, Georgia, Oklahoma, Alabama, and Florida (with more regions being added each year!) We treat our borrowers as our partners, and your success is our #1 priority. For more information on how we can help you with your investing goals, check out our terms and apply today.