Are you into fix-and-flipping homes?
Then you might encounter some severe problems with the traditional loans that are provided by traditional banks and financial institutions.
Here, hard-money construction loans can save you. These are basically short-term loans that are used for financing the construction of several real estate projects.
What Are Hard Money Construction Loans?
Usually, hard money construction loans last for 12 to 24 months and are typically intended to assist the builder pay for their construction projects. After closing, a part of the loan is used for buying the property, and the remaining part is held in an escrow account.
That amount is later disbursed to the borrowers because the project is constructed.
Basically, there are 2 types of hard money loans available in the market:
- Rehab loans, or loans particularly for the renovation of an existing project.
- Loans, particularly for the ground-up construction of a totally new project.
The Benefits Of Hard Money Construction Loans
Now, you get a basic understanding of what hard money construction loans are and what their types are. Now, if you are thinking about how this particular loan can help you, here are the major benefits that you will get from hard money loans.
Now, let’s have a look at them.
Benefit No. 1: Speedy Closure
When you are opting for hard money loans, you simply can expect the approval along with the funding to occur really quickly.
Isn’t it really interesting?
In most cases, the approval for a hard money loan usually takes around a day once the checking of requirements is done and they are in proper places. The requirements usually involve the borrower’s experience, the property, the cash reserves of the borrowers, the down-payment or equity of the borrower, along with the exit strategy.
When everything is in the proper place, your hard money loan will get approved immediately. After the approval is done, the funding generally takes around 3 to 5 days.
If you opt for a loan from all those traditional banking institutions, it will take at least 30 days to complete the process and get the funds finally. So, you see, hard money loans are far faster than traditional loans.
So, when you need some funding on an immediate basis, hard money loans are your savior.
Benefit No. 2: Flexible Underwriting
When it comes to the type of project, hard money lenders are much more flexible than traditional bank loans. You even can get funding for some particular projects for which you can not get funding elsewhere.
Whether it is a commercial project or a residential project, you can always use hard money loans. Apart from all these types of loans, hard money lenders also offer loans for other projects in which conventional financial institutions will not be interested.
Traditional banks are always risk-averse lenders when it comes to loans. That is why they do not consider offering loans for those projects that do not fit their typical criteria. That is why they do not offer fix-and-flip loans. Here hard money lenders will always be there.
Benefit No. 3: Much Fewer Requirements
We all know how strict conventional financial institutions like banks are. Compared to banks, hard money lenders always have fewer requirements. And also, for particular cases, they are flexible enough to outlook or skip.
There are some conditions that are considered important for hard money lenders, such as an exit strategy, equity of the borrower on the particular property, ample experience, and cash at hand.
Just because they have very few requirements, the chances of getting loan approvals automatically increase. Now, if we look at the requirements of banks, the list is too long. Also, with every passing year, they are adding more and more.
These typically involve bankruptcies, foreclosure, short sales, bad credit, and modifications to the loans. On the other hand, for hard money lenders, as long as the down-payment and equity are good, there will be no issue.
Get Hard Money Loans
If you need a loan on an immediate basis, hard money loans are always the best solution. Also, it does not have very few requirements, and that is also flexible for most cases.
There might be chances that your project might get out of your hands when you are waiting for a loan approval through traditional banks.
So, if you want to seize a deal really quickly and you are able to make some down-payment, you should always choose hard money construction loans for your real estate projects.