6 Things to Consider When Applying for a Hard Money Loan

Hard money loans offer a quick and easy financing solution for real estate businesses. They are classified as bridge loans that, like other bridge loans, are used to temporarily fill a gap in financing. Hard money loans, though, are typically used for real estate transactions. There are several things you should consider when applying for a hard money loan, some of which include the following.

6 Things to Consider When Applying for a Hard Money Loan

#1) Property Value

You should consider the value of the property for which you intend to use the hard money loan. Hard money loans are secured with real property — typically the property that they are used to purchase. You’ll need to analyze the property value before applying for a hard money loan.

#2) LTV Ratio

Don’t forget to consider the loan-to-value (LTV) ratio when applying for a hard money loan. Lenders typically offer loans based on a percentage of the property’s value. LTV ratio represents the amount of a hard money loan relative to the property value. Be sure to understand the LTV ratio and whether it will cover the amount you need to finance.

#3) Term Length

While hard money loans are classified as short-term loans, some of them have a longer term than others. If you’re going to apply for a hard money loan, you should consider the term length. Common term lengths for hard money loans include 6 months, 12 months and 24 months.

#4) Interest Rate

One of the most important things to consider when applying for a hard money loan is the interest rate. When compared to conventional loans, hard money loans typically have higher interest rates. You’ll have to pay more in interest when using a hard money loan. On the other hand, hard money loans don’t require good credit. They are secured using real property, so lenders pay little or no attention to credit.

#5) Fees

You should consider the fees when applying for a hard money loan. In addition to interest, many hard money loans have fees. You may have to pay an appraisal fee, for instance, and the lender may require you to pay closing costs. Regardless, you should familiarize yourself with these fees when applying for a hard money loan.

#6) Speed

How long will it take the lender to approve your application? All hard money loans are fast. The fast nature of them, in fact, is one of the main reasons why so many real estate investors and business owners choose them over conventional loans. But some lenders have a faster approval time for their hard money loans than others.

This article was brought to you by Intrepid Private Capital Group, a Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.