When it comes to real estate, many homebuyers are under the impression that traditional bank loans are the only way to go. While that may be the most prevalent option, hard money lenders have another option to offer: hard money loans.
Now, for the big question: what’s the difference between hard or private money loans and traditional bank loans? If you’re having this exact thought, keep reading. Below, we’ll explore just a few things that differentiate hard money loans from traditional bank loans.
When you’re working with a bank to secure a loan, your interest rates will generally be lower than if you were to work with a private money lender. That being said, hard money loans are perfect for house flippers. If you’re not planning on staying in the home you purchase, a high-risk, flexible loan may be a better investment. Most hard money loans also secure property with 30% to 50% equity as a protective measure for the investor.
In a perfect world, every bank could close a loan within 45 days. Unfortunately, we don’t live in a perfect world. As a result, the majority of traditional bank loans take anywhere from 60 to 90 days to close. That’s three whole months! Hard money loans, on the other hand, are generally closed in anywhere from a few weeks to a few days. Again, if you’re truly investing in real estate property, hard money means quick turnaround, which in turn means you can get to starting your project faster.
Eligible Property Types
The majority of traditional bank loans for real estate focus on single family homes and a few different types of commercial properties. Hard money loans, on the other hand, deal with a much more diverse pool of property types. For example, hard money can be applied for construction loans, mixed use property loans, and bridge loans. If you’re looking to invest outside of a conventional real estate project, hard money lenders may be a better option for you.
Whether you’re flipping a home or working on a massive construction project, it’s important to consider which type of money lender would be the best fit for your endeavors. For all of your hard money questions, don’t hesitate to contact Maggio Capital today.