What Is A Hard Money Loan?
Getting the funding necessary to buy a property can be frustrating at times. For most real estate investors, flippers, developers, and contractors, hard money is an easy way to borrow large sums of money relatively quickly.
Hard money loans can be described as short-term loans procured by having the property the borrower wishes to purchase as collateral. Although these loans generally have higher interest rates and closing costs than conventional loans, they also close very quickly and require very little paperwork. As a matter of fact, income proof and credit checks are not required to be eligible for this loan.
While closing fast is important to some investors, it’s also important to consider that hard money loans are usually interest-only and may require up to 50-60% down payment. If you’re an investor that is unsure which option is best for you, then keep reading as we show the pros and cons of hard money loans and their comparable alternatives
Are There Better Alternatives to Hard Money Loans?
Hard money loans are not the only options available for investors wanting to finance one or more investment properties. Lenders are loaning money to individuals and companies by using the property’s projected rental income as the main requirement to be approved. A great example of this is when your rental property’s income is higher than the monthly cost of your mortgage. This aspect alone is a very important requirement for approval of this loan.
Although this is only one option to avoid hard money it’s a very popular one people and companies use to purchase or refinance their desired investment property. This type of loan generally has much better rates and terms than hard money with benefits like:
✅ No Income Proof
✅ Fixed rates starting at 5%
✅ 30-year Amortizing Options
✅ Up to 80% loan-to-value (LTV)
How Do Hard Money Loans Work?
Traditionally, lenders assess your financial health, your debt history, as well as your investment portfolio, before they decide to do business with you. Hard money loan lenders, on the other hand, tend to take more risk in exchange for higher rates.
Unlike traditional loans, hard money loans have short repayment periods and are provided based on the market value of the property to be purchased. If everything goes well, you may receive your funds in less than a week.
Naturally, it is a hot favorite of “fix-and-flip” experts who want to either improve/renovate the homes they have purchased or found a property selling at a deep discount and need to act on it quickly. After they’re done, they sell it at a higher price, which helps them pay up for the loan and turn a profit.
Wondering about the documents required and the eligibility criteria you would need to fulfill to qualify for a hard money loan? Let’s go through some of the most important ones:
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- Purchase contract
- Two forms of identification
- Title agreement Proof of insurance
- 40-50% down payment
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Have more questions about hard money loans? Whether you are a first-time loan seeker or a seasoned real estate investor, SYLA Lending is here to break down hard money loans for you as well as offer alternatives that could save you money on your financing and increase your ROI.
If you would like to know more about the interest rates of our offerings, feel free to reach out to us!
Benefits of Hard Money Loans
Still on the fence about financing your investment property with a hard money loan? At Syla, we’ll provide the most fitting options available to finance your investment property quickly. Let’s go through some of the benefits of exploring a hard money option:
- Speedy Approval & Funding: Why wait around for 30-40 days when you can get your loan approved quickly, with wait times ranging from a few days to up to 2 weeks.
- Less Documentation: SYLA Lending provides loans based on the property you intend to purchase, not on the basis of your credit history, income proof documents, or investment portfolio. So, you won’t be buried under paperwork!
- Flexible Term Structure: We offer different types of payment programs, such as interest-free payments and fixed-rate amortizing options, all with short and long-term repayment options. We’ll find you the financing that fits your specific needs.
- 50-80% Loan-To-Value Ratio: That’s how high we are willing to go to help you lock down the property you are interested in!
Focus on monetizing your investment property; we’ll take care of the rest.
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Are Hard Money Loans For You?
There are quite a few scenarios in which hard money loan mortgages may prove to be a blessing in disguise for you. If you own a company looking to buy an office space, you can do so with the help of a hard money loan. The same goes for purchasing a new storefront at a promising retail hub. In addition to fixers and flippers, hard money loans are also a trusted option used by investors interested in monetizing rental properties.
If any of these scenarios describe your goals, then yes, hard money loans are definitely for you! That being said, however, the experts at Syla Lending always look at the possibility of providing funding from alternative options with better interest rates and terms than hard money loans. Our goal is to provide each client with the right funding that will yield them the highest return on investment.
SYLA Lending — No More Red Tape Around Loans
At SYLA Lending, we’re committed to offering our clients the funds they need to transform properties into profitable real estate investments. We’ll provide options with great rates and terms that will improve your return on investment (ROI). You can expect a quick closing and efficiency when you choose us as your lender!
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