What Is a Hard Money Loan?
A hard money loan is secured by real estate instead of the borrower’s credit history. They’re also known as short-term bridge loans. These loans are used primarily in real estate transactions. The lender is usually an individual or company and not a bank.
Real estate investors, house flippers, and developers often use hard money loans. These loans are a faster and more convenient way to finance an investment purchase. They don’t require traditional financing or the approval process required by most financial institutions. These types of loans do not require a borrower to have good credit.
A Quick Hard Money Loan Overview
- Hard money loans can be used for real estate transactions. They are money from an individual, company, or institution and not a bank.
- Hard money loans are a quick way to raise funds, but they have a higher cost and lower LTV.
- The funding process is quicker because hard money loans are secured and not dependent on the applicant’s financial situation.
- Hard money loans are often subject to negotiation between the lender as well as the borrower. These loans often use collateral such as property.
- Lenders can still make a profit by collecting collateral if the borrower defaults.
These loans are used to finance a property that is being renovated or developed and then sold for profit. A hard money loan is more attractive to investors than a conventional loan due to its ease of access. Lending options from financial institutions can be difficult to approve and require a lot of paperwork.
How Does a Hard-Money Loan Work?
The real estate project’s potential typically secures hard money loans. It makes approval much quicker. We will generally review the property and decide on lending within days.
The terms of hard money loans are based on the collateral value and not the creditworthiness. Hard money lenders are not traditional lenders like banks. Instead, they are private individuals and companies who see the value in this type of risky venture.
Home flippers may seek hard money loans if they plan to renovate the property and then resell it. Often, the loan is paid off within one year. A hard money loan can be expensive, but the borrower will pay it off quickly. Most hard money loans last for between one and three years.
What are points and interest rates on hard money?
For providing the loan, hard money lenders often charge fees. These fees are known as “points.” Points are equal to one percent of the loan amount and can range from 2% to 3%. The interest rates for a hard money loan vary depending on who is lending it and the deal. Most lenders will offer loans with a fixed rate of interest. However, there are some cases where you may be able to negotiate a floating rate. Hard money loans have an interest rate between 11.99% and 13.99%, depending on the lender and the calculated risk.
What are the requirements of borrowers for hard money loans?
Private individuals and companies can provide hard money loans. Therefore, loan requirements may vary between lenders. The borrower usually deals directly or closely with the lender and, thus, can negotiate better terms. You might have to provide additional information if you are a first-time borrower. Lenders will typically review the borrower’s financial history and verify the asset’s value before granting a hard money loan. Usually, a down payment of 30% to 40% is required to secure the loan.
The Smart Way To Invest in Real Estate
A great way to finance a real estate investment is with hard money loans. Hard money loans are a fast and easy way to get financing. You get access to the funds faster, and the loan is based more on the asset purchased than the borrower’s credit or personal approval. You should ensure that you choose a trusted private money lender with a proven track record in the field when searching for a hard cash lender.
These loans may not be the right choice for everyone. You will pay more for the convenience of a hard money loan. These loans not only have higher percentage points than traditional loans but may also be subject to additional fees and costs. Hard Money transactions will have higher closing costs.
Why DFW Investor Lending, LLC?
Next Level Service & Transparency
When you work with our dedicated team members, you will receive unwavering support and advice. We have been through the process and can anticipate challenges and bumps in the road. We believe in authenticity.
That is why we eliminate the “middle man.” We are the administrators. All of our clients deal directly with us. Unlike many “lenders” claiming their services in a particular city (meanwhile, their offices are in another state), DFW Investor Lending has real roots in Dallas. We service the community with pride and integrity.
Fair Rates & Generous Lending Guidelines
Our Dallas hard money loan rates are of the highest caliber compared to our competitors. We not only offer fair interest rates but take each of our deals very seriously. When we lend, we are considering the real estate property first and the borrower second.
We are determined to help you reach your home investment goals with the most structured and unrivaled loan programs. Our loan program profitability calculator accurately provides your monthly payment and the potential profits from your deal.
As stated above, there is absolutely no fee for early payment. That means you can pay off your loans anytime within 12 months with no penalties.
Origination fees are kept as low as 2-3%! Our loan term is conveniently set at 12 months to provide realistic and smooth repayment. We never charge a prepayment fee. We always put our client’s interests first.
How Do I Get Started?
Are you ready to tap into your limitless potential in the real estate arena? Are you excited to work with mentors who will advocate for your success in every way possible? If so, we are glad to have you.
Call us to get started on your transformative journey. One of our kind and dedicated team members will be glad to assist with any questions you may have. We take pride in our customer service and are here for you. (214) 382-2676. We are open Monday through Friday, 8:00 am – 5:00 pm CST.
If you prefer, fill out our online application form for convenient online access. We will review your application and be in touch shortly.
If you have any other questions and would prefer to reach out via email, simply fill out the online application form here on our website, and one of our team members will promptly respond to your inquiry.
We look forward to showing you all the possibilities of our loans. From brand new to seasoned investors, DFW Investor Lending is your go-to lender.