Hard money loans are short-term financing options that are typically used by real estate investors. They are secured by the borrower’s real estate asset, and the loan is typically made for a period of one to three years. With hard money loans, borrowers can acquire the capital they need quickly and without having to meet stringent lending criteria. If you are looking for the best hard money lender in San Francisco, you may navigate online sites.
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Advantages of hard money loans:
Speed of Funding
One of the biggest advantages of hard money loans is the speed with which the money can be accessed. Since the loan is secured by real estate, there is less paperwork involved and the loan can be approved much faster than a traditional loan. This makes hard money loans a great option for investors who need to close a deal quickly.
Higher Interest Rates
Because hard money loans are typically riskier than traditional loans, they come with higher interest rates. Interest rates on hard money loans can range from 8-15%, depending on the lender and the borrower’s creditworthiness. Borrowers should compare interest rates carefully and make sure they understand all of the terms of the loan before signing any documents.
Loan-to-Value Ratio
The loan-to-value (LTV) ratio is an important consideration when taking out a hard money loan. LTV is the amount of the loan compared to the value of the property it is secured against. Generally, lenders will not lend more than 70-80% of the value of the property. This means that the borrower must have enough equity in the property to cover the loan amount.
Flexible Payment Options
Hard money loans often come with flexible payment options. Borrowers may be able to choose between interest-only payments or principal and interest payments. This can be beneficial for investors who may not have the cash flow to cover the full loan amount each month.