The hard money lenders are in business because of the rehabbers that needs the quick money for the renovation project. The money is mostly used to pay contractors, purchase the property and to cover any expense that may emerge. The financing is more flexible than the traditional lending such as the banks. The following are some of the issues that you need to know before lending the money.
Short Term Loans
These kinds of loans are short-term, and they have higher interest rates. You will be expected to repay the whole amounts for the periods not exceeding three years. The interest rates payments will begin immediately and the borrowers should clear the principal amounts once the sales of the house is done. Your eligibility will determine the amounts that you will be loaned.
These types of loan facilities are faster than the traditional lending such as the banks. The loans can be approved within the same day the disbursements made on the same day. These quick processing ensures that the investor have a competitive edge over other investors. Your finical history will not be used and the value of the property after the renovations will influence the amounts that will be disbursed.
The documents that will be required will depend with the company but some of them are standard. You need to have a detailed financial plan for the money that you are requesting to increase your chance of getting high amounts. The documents that are important includes the appraisal certifies, the recent tax returns and the repair costs of the building.
Most Lenders Cap Their Financing At 70%
The percentage of the finances is based upon the value of the property and the characteristics of the borrower. Most of the creditors cap their percentage of financing up to 70% of the value of the property after repair. The remaining 30% ensures that the lender is safe and that they can cushion against defaulting from their clients.
The 30% Capital From The Borrower Shows Commitment
The 30% capital from the borrower is necessary to the financiers to show that as a borrower, you are also committed to your project. The creditors are sure that you cannot fail to raise the 30% capital if you are serious about the deal.
The hard money lending has led to the boom in the reals estate business as a result of the quick access to financial aid.They provide the lending based on the estimated value of the property. You should check the fine details of the lending to ensure that you get the best financiers. The hard money lenders are diverse in times of the services, and they can consider most of the properties as long it promises to bring back profits.