What Makes Hard Money Loans Better Than Traditional Loans?

When you run out of cash while renovating a property to resell, Miami’s hard money lenders can give you quick funding. You can also turn to banks for loans, but hard money loans might be the better option if you need the money right away. Your choice, then, depends on the urgency of your financial needs.

A Short-Term Loan with a Fast Approval Process

It can take weeks to get the approval of a traditional lender. Traditional loans often entail a slow process for anyone, despite adequate credit scores and suitable income.

But with hard money loans, speed is a bonus. The lender focuses on the collateral, so there’s less concern about your financial standing. It doesn’t matter if your credit rating isn’t perfect either. The process may be complete in a few days because the lender will evaluate the property you have and not you.

With a hard money loan, it’s not about how much you have; it’s about the value of your property, which the lender will use as the only protection if you default on the loan.

Close Hard Money Loans Quicker than Traditional Loans

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Another thing you can appreciate about hard money loans is that you can close them faster than traditional loans. These short-term loans usually last about a year, which is why it’s an ideal source of funding for property flippers. If you sell the home in under a year, you can pay off the loan faster.

But the interest rates for hard money loans are typically higher than the usual bank loans. So like all loans, you would want to pay the hard money you borrowed right away.

On the plus side, hard money loans have lower loan-to-value (LTV) ratios compared to traditional loans. You can also borrow about 60 to 80 percent of your property’s estimated after-repair value (ARV).

This is another difference that hard money lenders have over traditional lenders. The latter base their loan amounts on a property’s current market value.

Also, lenders would rather not take your property. All you need is to talk to the lender, build a relationship that can help speed up the process, and give you the terms to close deals that others can’t.

Hard Money Agreements are Flexible

In most cases, hard money lenders offer up a flexible agreement. Unlike traditional lenders, hard money lenders don’t use a standardized underwriting process, which is an automated program used by loan originators to qualify a borrower. Instead, they assess every deal individually.

The agreement may work best for your situation. You can even tweak a bit about your repayment schedules, as long as you and your hard money lender meet halfway.

Sometimes, hard loan lenders are private individuals. They see value in this sort of venture. Therefore, you might be borrowing money from a person who can provide flexible terms and not a large lending company with tight regulations and policies.

When your property project needs fresh capital, hard money lenders can help. You don’t need to prove your credit worthiness. You just need to make sure that your property has sufficient equity to get a loan approval.

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