Do you know why property buyers prefer alternative financing? Big banks take long to approve loans and involve tons of paperwork. Luckily, there are various private money lending options available for those who need to close deals quickly.
Who is a Private Money Lender?
Private lenders are non-institutional moneylenders. They issue short-term loans to investors who are looking to renovate or buy real properties. Commonly referred to as hard money lenders, they offer quick funding for flippers, cash-out refinancing, and rehab projects. Let’s analyze the options in details.
Hard Money Loan
It is a short-term loan for which real property is held as collateral. The borrower submits their house or any other real estate as security. The lender is guaranteed payment if the borrower defaults the loan.
Less paperwork is involved. That’s why hard money loan for rental property fund faster than standard bank loans. Hard money lenders are usually individuals or small investment groups. The loan terms are generally shorter and do not go past 5 years.
New Construction Loan
A new construction loan is usually a short-term deal of about 12 months. It closes the gap required to build a house. A new construction loan ensures that your project closes as soon as possible.
When the house is complete, a buyer takes possession and the loan is converted into a regular mortgage. The reason private lenders like this deal is that there are always ready buyers for new properties. They also have the right to sell if no payments are made.
A bridge loan helps homeowners to acquire new homes before selling their old houses. Under normal circumstances, you would need cash to buy a new home as you wait for the old one to get a buyer. However, a bridge loan offers you the purchasing power even before you sell an old house.
It covers the down payment cost and other critical fees. Then you are expected to pay it in full when your property sells. There’s never a guarantee that the first house sells in good time.
Not every homeowner qualifies for a bridge loan. You have to be approved for owning two properties simultaneously even if it’s for a short span. The best time to get a bridge loan is when relocating or you need to move quickly.
Hard Money Refinance Loan
Refinance loans fall into two categories. Suppose you buy a home using short-term hard money loan and plan to refinance the loan to a regular mortgage. In this case, you must qualify for a typical mortgage. The entire loan will be refinanced through a bank.
The next category is the cash-out refinance. Here, you refinance your home loan with a hard money loan. Your principal amount increases so that you get extra cash from the deal.
You can opt for cash-out refinancing if you want to remodel your property. Meanwhile, your property is held as collateral.
Hard money lenders for homeowners allow you to take a leap on your property. Remember that you can pre-qualify online from a good private lender in matters of hours. Connect to a lender today and receive hard money for renovation in the soonest time possible. Good luck exploring the 4 financing options!