A loan is usually an amount of money that we borrow from the other person, and that is intended to pay back with some interest in the given time.
WHAT IS a HARD MONEY LOAN?
When we talk about hard money, we may think that it is a specific type of shady work, and it perplexes your mind with different kinds of questions. Hard money loan differs from a conventional bank loan in a way that a hard money loan is defined as a short term loan. Real state secures the hard money loan.
The capital of stockholders subsidizes them. Terms and conditions of hard money loan say that you have to return the loan within 12 months, but it can also be exceeded for more than a year, like two or five years. One requirement of a hard money loan is a monthly payment. The best advantage of a hard money loan is that it helps you a lot when you need a loan urgently, as, in banks, there could be many issues such as credit issues, etc.
TEXAS HARD MONEY LENDERS:
They offer all kind of hard money lends for real estate investors such as:
- Fix and flips
- Rehabber loans
- Landlord Acquisition and Seasoning
- Spec homes for home builders
- Cash-out refi
VARIOUS HARD MONEY LOAN PROGRAMS
Up till now, we have come across the importance and benefits of hard money. Now, some of the many hard money loan programs in Texas are discussed below:
Lower loan cost v/s other hand money lenders
In lower loan costs, the borrower can ask out for new loans on conditions such as lower cost of borrowing or lesser interest rate than the former loans. The new loan money can be used to pay off the previous loans. This is a way of refinancing old debts. The borrower then has a lower fee for interest over the life of the loan, saving the money.
While in hard money lender’s interest rates and points charged by hard money lenders will fluctuate from lender to lender and will also shift from precinct to precinct. So in taxes, no interest is charged on your rehab funds until they are borrowed.
Hard money loans to value ratio
The loan to value ratio can be considered as a risk assessment ratio that compares the value of the asset to the amount of the loan given. Based on the ratio, one should calculate the cost of taking the loan. In taxes, many hard money lenders will lend up to 65-75% according to the current value of a property.
Some lenders lend up to After Repair Value (ARV), which estimates the future value of a distressed property after it’s been repaired. ARV is usually adopted by fix and flip investors who buy, renew, and auction the property within one year.
Some hard money lenders will lend a maximum percentage of ARV. This may sound great from the borrower’s view to start with, but these types of loans have a high risk involved, and the interest rate and points will be much higher. Expect 15-18% interest when a lender funds a loan with almost no down payment from the borrower’s side.
Best hard money lenders
There is a specific criterion by which we can effortlessly determine hard money lenders. Firstly, hard money lenders use lower interest rates for short term loans, and they charge lenders fees up to 3%.
Hard money loan terms are generally 12 to 24 months, and some lenders don’t have prepayment penalties for early repayment. Hard money lenders’ requirements include the investor’s experience and background, as well as a minimum credit score of 625.
Online hard money lenders tend to more good as they provide an exceptional level of customer service as compared to other traditional hard money lenders.
Hard money principle
As there are different types of mortgages available in hard money, you must choose what you need.
The primary priority of the lenders is the amount that you want to borrow, and as a depositor, how much you put down your financial status, credits record, and how you manage your monthly outgoings. If you don’t get through these terms, you may get rejected.
Covering up these basic requirements can lead to several problems for yourself. So, rather than lying and making things complicated, you should make clear statements about your stability.
Lending Home terms, rates and qualification
Lending Home interest rate starts at 6.99% for short term interest rates, which are quite competitive among industry averages. The lenders’ fees charges are between 1.5% and 2.5% with a minimum credit score of 620.
As compared to top hard money lenders, the Lending Home has the lowest interest rates, but they think that interest rate between 9% and 12% is standard. They have a typical loan term that is to be paid in full at the end of the terms of 12 months.
The priorities of the property can be more than the borrower by looking at the property condition and rehab costs. Lending Home examines each market on its own for a hard money loan. In other words, the pricing and terms are influenced by your local market and asset.
If you have experience as an investor, then you have more chance of a lower rate. Thus, the rate will be depending on your own experience.
Hopefully, by this blog, you’ve got enough knowledge about hard money programs that are present in Texas. The high mere rates interest may scare you at first; however, the beneficial outcome is worth opting for hard money.