Do you need a loan to remodel your home, pay for your child’s education, or expand your business? When you own real property that can be used to secure a loan, you may want to consider borrowing money from a private lender.
Some Differences Between Traditional and Hard Money Loans
Since hard money loans are private, it’s important to know that higher interest rates and lower loan-to-value ratios usually apply. In general, these might range between 15% to 18% or more.
It’s also important to note that the duration of the loan, or the repayment period, will also tend to be less than with a traditional loan. While the repayment period for a traditional loan may be from 1 year to 20 years, private loan repayment periods will usually be limited to 5 years or less.
In order to protect the lender’s investment, most hard money loans will need to be secured with real property. When a potential borrower has 30% to 50% equity in a home, boat, or business, for example, this may assist them with obtaining a hard money loan.
A Home Equity Example
When someone purchases a home, they usually have a 15-year or 30-year mortgage. Given that home prices tend to increase over time, the equity they have will also increase the longer they own their home.
While there are several factors that will contribute to the amount of home equity people have, homeowners under 35 tend to have a median amount of $20,000.00. In order to obtain a private money loan in this instance, the homeowner would usually not be able to borrow more than $20,000.00 unless they possessed equity in another property or business.
The Benefits of Borrowing from Private Lenders
When you take out a loan from private hard money lenders, they usually take less processing time. This is a primary reason why these types of loans are popular. In general, hard money lenders may be able to process your loan in 7 to 14 days.
If you’re interested in learning more about these types or loans, or want to determine whether or not you qualify, contact a private hard money lender. When you need money to borrow money, and have the property equity to secure a loan, this can be a welcome option.