If you are not familiar with Commercial Hard Money Lenders, then you won’t understand why these Loans can be expensive. But there are many benefits that are worth paying the higher cost.
A lot of what you read on the Internet and in financial books and magazines will tell you that working with Commercial Hard Money Lenders are very expensive. And while there are costs involved in these Loans that are greater than the charges you pay for a traditional loan, you get a lot for your money. But most of these resources fail to explain the benefits of hard money and why it is a smart choice for many real estate investors.
The first piece of information that most borrowers ask about is the interest rate they will be paying. And while hard money Loans have a higher interest rate, sometimes as much as 20%, there are some very logical reasons for the increased rate. Commercial Hard Money Lender is private lenders who are free to select the interest rate that they charge their clients. But they do not simply choose a random rate for each loan. They have a process of accessing the amount of risk associated with the loan that is being requested and then charging what they believe is an applicable interest rate. So, the riskier the investment, the higher the interest rate, but when you consider the fact that a bank would not approve or fund a high-risk loan, then paying more for hard money seems like a simple choice. In reality, hard money might be your only choice.
Hard money Loans are usually a much shorter term than a traditional loan, which works perfectly for a real estate investor. Banks and mortgage companies write Loans for 15 or even 30 years. And if you pay the loan off early, you could be charged an early payoff penalty. But Commercial Hard Money Lender will work with you to customize the term of the loan and eliminate the penalty of paying off the loan early.
Down Payment Terms of Hard Money
When you take out a hard money loan, you will be required to make a substantial down payment. This money that you are investing in or putting down on the property creates instant equity. And that instant equity is suitable for both you and the lender. If you default, the lender is sure to recover his or her investment when the property is sold. The equity also works on your behalf. It provides you with the ability to make a more substantial profit when you finish the project and sell it. And even if the project runs into challenges, you have that equity to fall back on for additional financing.
Hard Money Is Worth the Higher Cost
Not every project is suitable for a traditional bank loan. And you might not want to be tied to a loan for an extended term. But when you are working with a hard money lender, you can customize the terms of the loan to meet your needs and the needs of the specific project. These Loans meet a need for many real estate investors who understand that the added benefits are well worth the added cost.
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.