If you've decided to buy a property and flip it, then you might need investment finance. While you can approach traditional mortgage lenders, you can also try to finance the project through a private hard money lender. What are the advantages of using hard money loans?
1. Speed Up the Lending Process
You don't always have a lot of time to buy a property and flip it. You might need to move fast before other buyers make their move. However, getting a mortgage loan can take time. Mortgage lenders don't always move fast. Credit checks and other regulations mean that you might not be able to close the loan in time.
Private lenders who give out hard money loans don't have these restrictions. Once they establish that the project is profitable, they can move fast. You get more of a chance of buying the property when you need to move quickly.
2. Borrow More Money
Mortgage lenders might not let you borrow as much as you need for the whole flipping project. The amount you can borrow is often tied to your credit record. If your credit rating isn't good, then you might not get approval for the loan.
Plus, these lenders typically work on the property's purchase value. They can't necessarily factor in the value of the property after you have finished its renovation. So, you might get a mortgage to buy the property but not enough money to develop it.
A hard money lender doesn't use your credit history as a risk measure. You typically use the value of the property as collateral instead. They also consider the property's value at the end of the project rather than simply using the purchase price. As long as your project is viable, you have a better chance of borrowing all the money you need.
3. Set More Favorable Terms
Mortgage lenders have standard terms. While some might give you a little flexibility, you usually have to stick with their conditions. For example, you might have to borrow less or pay higher interest rates if your credit rating isn't perfect. You have to go with the lender's standard fees, costs, and repayment schedules.
Hard money lenders can be more flexible. They don't need to tie their terms to your credit rating. You might be able to negotiate their terms to suit your needs. For example, a lender might allow you to set your own repayment schedule, or they might agree to lower some of their fees.
To find out more about how these loans work, contact hard money loans providers.