Unlike bank loans, which are based on the borrower’s credit, hard money loans are based on real estate assets. Under hard money loan agreements, your real estate properties become the collateral for your financing agreement.
While some individuals may not be willing to use their property as collateral for a loan, other individuals may welcome the idea of being able to skip an extensive background check to have access to financing. A major difference between traditional bank loans and hard money loans is that in the latter, lenders focus their attention in assessing the value of a property. Evaluating the market value of a property can often result in much faster lending decisions.
There are a number of factors to consider when choosing which loan is the right fit for your real estate investment. For investors needing a quick turnaround to take advantage of the best new opportunities rather than moving at the speed of traditional banks, a hard money loans could be the answer. However, real estate investors should keep in mind that hard money loans have a much shorter payment period than traditional mortgage loans. That shorter payment period usually ranges between 1 and 3 years.
Take a look at this infographic to learn more about some important facts and figures about hard money loans.
Image Credit: GotCredit