When we talk about NYC hard money loans, you’d probably think about suspicious-looking lenders who charge high interests and do businesses in dark alleys. That’s because a couple of years ago, bad lenders would provide risky loans to borrowers, with real estate as collateral. But in the end, they only want to foreclose on the properties. Fortunately, these kinds of lenders don’t exist anymore – at least most lenders are decent now.
Before you get into a deal in getting a hard money loan, here are things you might want to know. Let’s discuss what hard money loans are and how they work.
Hard money loans are short-term loans, but instead of looking at the borrower’s capacity to pay, they use real estate as collateral. The terms for these loans are usually around 12 months up to 5 years. The loan needs monthly payments of interest or internet plus some principal, with a large payment at the end of the agreement.
Hard money lenders can grant borrowers any amount based on the collateral value. They care less about your capacity to pay – they’re more concerned about your property’s value. So, even if you could not pay the loan, your property will cover it. And even if your bank says no, hard money lenders can still say yes.
What kind of deals can you use NYC hard money loans for?
It’s not advisable to use a hard money loan for all deals. Take purchasing a property with solid income history and good credit, for example. In this case, conventional financing through a bank is your best option. Even if this process takes a while, bank financing is still ideal for this purchase. Only go for a hard money loan if the banks aren’t an option or if the loan is only for a short period.
Use hard money loans for the following deals:
Why use NYC hard money loans?
Real estate investors use hard money for so many reasons. The primary reason is the ability of the lender to fund the loan quickly. Usually, hard money lenders can approve a loan in less than a week. Compare that to the 45 days it takes for banks to approve a loan. Hard money loan applications generally take 1 or 2 days. In some cases, lenders can grant them on the same day.
Of course, real estate investors benefit from obtaining funding faster than bank loans. If a real estate investor wants to acquire a property with many competing bids, it will get a seller’s attention if the hard money loan is closed quickly. It will also set their offer apart from the other buyers who offer slow conventional financing.
Another reason why borrowers use a hard money loan is if the banks have rejected them for a conventional loan. As they say, life won’t always go according to your plan. Credit issues, foreclosures, short sales – they can happen. Banks also check the income history of their borrowers. If the borrower has recently started a job, the bank will deny the loan request because of insufficient income history, whether he makes a healthy income or not. Hard money lenders look past these issues if the borrower has enough equity invested for the collateral or repay the loan.
As previously mentioned, hard money lenders primarily care about the collateral value – the amount of money invested in the property. They care less about the borrowers’ records, including short sale or foreclosure, as long as the borrower has the capital to repay the interest. Also, they don’t care about the borrower’s credit rating. They will overlook any issues on the borrower’s record as long as they have the capital to pay the loan interest.
Hard money lenders will need to consider what the borrower wants for the property. There must be a reasonable plan to show how the borrower will completely pay off the loan. Usually, the borrower needs to discuss improving or selling the property. And if they need to obtain long-term financing in the future, they also need to discuss this.
You can find a reputable hard money lender in so many ways. One of the easiest ways to find one is by utilizing the internet. Just look up hard money lenders on Google, and you should be able to find someone you can trust. You’ll find companies on the search results, as well as a list of lenders that other people compiled. The internet is a good place to start, and from there, you can contact and evaluate them.
If you don’t want to look for them online, you can also find a lender by attending real estate investor club meetings, if there’s one in your area. These club meetings are where you can find several lenders who want to network their potential borrowers. You should ask other real estate investors if you can’t find one in the meeting. Conventional mortgage brokers, real estate brokers, and other professionals should recommend a hard money lender. What you need to do is to leverage your existing network to see who they mostly recommend.
Once you obtained a list of few lenders, then you can start contacting them. Talk to them and find the most suitable lender who can fund your next deal.
Potential Benefits Of A Hard Money Loans
Hard money bridge loans can be a great funding option for people who are experiencing difficulty obtaining a more traditional bank loan. Hard loans have a number of potential benefits, too.
There are many benefits of hard money loans that you can expect to achieve, but this doesn’t mean that they are without their risks. You should always take the time to assess the financial dangers associated with missed loan repayments, no matter what loan type you choose to pursue.
Putting it all together
While hard money loans can be approved faster than bank loans, they aren’t always the best option for you. Not all transactions require you to borrow from hard money lenders. Only use a hard money loan if the bank rejected your application or if you need funding as soon as possible.
Finding a hard money lender shouldn’t be hard – you can either find one online or expand your network. Reach out to real estate investors to obtain a list of reliable hard money lenders. Contact them one by one to evaluate who best fits your needs.
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