Are you in need of cash to finance an urgent project? Private money loans come in handy. These loans are quick to access. They are a good idea when you do not have time to go through the traditional loan application system. Also, it is a good alternative when you do not qualify for bank loans. Their processing period is short enabling you to secure a deal.
The private money lenders are investors that do not usually offer banking services. The loans are short-term and you need to repay them within one year or more. If you are a first-timer, you might be wondering how many types of private money loans are available in the market. This blog is going to help you understand this aspect.
Here are the types of private money loans that lenders offer:
Hard money loans are credits secured with real estate property. The lenders request a borrower to use their property as collateral. If you want to apply for this type of loan, you must have a property to secure it.
Many hard money lenders in New York like Gauntlet Funding offer short term loans that you can repay within 1 year or 5 years. The processing period is short as it does not have lengthy paperwork. All you need to qualify is the title or ownership deed of your property. This way the lenders will be certain that they can possess your property in case you fail to repay your loan.
As a real estate investor, you might be in a buy and sell business. In the process, you find a prime deal that you cannot afford to miss. Someone is selling a property that you urgently need. Unfortunately, the current property is yet to find a buyer. Here is where bridge loans come into play.
These loans help real estate investors to bring the financial gap between selling the current property and buying a new one. The private lenders offer you the cash to pay for the second property while await for the first one to sell.
However, not every person can get this loan. The lenders require you to own two homes at that time. This way, they can minimize their risks in case your first property does not sell.
Are you a fix and flip investor? Sometimes, you may not have money to improve the property you want to flip. Your bank may not be willing to offer you loans or the process might delay your plans. At this point, fixing and flipping loans from private investors come in handy.
The fix and flip loans are short term credits from private money lenders. These loans are suitable and help you avoid wasting time or holding property for a loan. The loan covers minor and major improvements to the property. You repay it back with an interest upon selling the renovated properties.
Private money lenders also fund you to construct a new home. They will help you start construction immediately and ensure no gaps in the process. When you complete your house, the loan becomes a regular mortgage. You can repay the loan within a given duration. Also, you can sell the property and repay the loan. The private lenders can help you find a suitable one.
Private money lenders love this arrangement as they have the right to repossess the home in case you fail to back the loan. There are also many buyers searching for properties. So, it is a win-win deal for them.
Sometimes, you might have challenges paying the short term hard money loan. Your plan now is to convert it into a regular mortgage via a bank. Private money lenders agree to refinance you to realize this goal. However, you must qualify for a mortgage to enjoy this type of refinancing loan option.
Another type of refinancing loan the private money lenders can offer to you is cash-out. Here, you pay your home loan through hard money. The result is an increase in your principal amount. The lenders offer you extra money. In other words, they top up your current loan to enable you to achieve your objectives.
As you can see, private money loans are crucial when you need urgent cash to close a property deal. The lenders in this sector have simple and faster processes compared to the traditional banks.
So, you do not need to postpone your renovations or miss a prime property deal due to financial constraints. Find a credible private money lender and keep your project or business moving.
Photo by Austin Distel
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