There are several benefits to using a hard money lender, also known as a private lender, instead of a traditional bank for your real estate investment needs. Here are some of the key differences between the two:
- Approval and Funding: Hard money lenders are able to approve and fund loans much more quickly than traditional banks. This is because they do not have to follow the same strict underwriting guidelines and can make decisions based on the value of the property being used as collateral rather than the borrower’s credit score or income. This means that even if you have poor credit or cannot provide proof of income, you may still be able to secure a loan from a hard money lender.
- Repayment Terms: Hard money lenders are more flexible than banks when it comes to repayment terms. They are often willing to work with borrowers to create a repayment plan that fits their needs and budget. This can be especially helpful for real estate investors who may not have a steady stream of income or who are working on a tight timeline to complete a project.
- Loan-to-Value Ratios: Hard money lenders are often willing to lend a higher percentage of the property’s value than banks, which can be beneficial for borrowers who need to borrow a large amount of money or who are working with a property that has a low value.
- Property Types: Hard money lenders are often willing to lend on non-traditional properties, such as fixer-uppers or properties in need of major renovations. This can be a great option for real estate investors who are looking to purchase and renovate a property, but may not be able to secure financing from a traditional bank.
- Personalized Service: Hard money lenders are typically smaller, more personal organizations than banks, which means that you are likely to receive individualized attention from your lender. This can be helpful for real estate investors who may need guidance or advice on their investment, as well as for borrowers who are new to the real estate market and may not be familiar with the lending process.
Overall, using a commercial hard money lender instead of a traditional bank can provide many benefits, including faster approval and funding, more flexible repayment terms, higher loan-to-value ratios, financing for non-traditional properties, and personalized service. If you are considering investing in real estate, it may be worth looking into hard money lending options to see if they could be a good fit for you.