3 Advantages Of Using Private Money Lenders

There’s a language spoken by real estate investors. If you’re going to try your hand at real estate investing, then there are some terms you need to know. Private money loans are one of them. The advantages of hard money loans, as it’s also called, are tailored specifically to the real estate investor. 

 

Good For New Investors

 

Banks and other lending institutions require A-list credit scores, substantial income, little to no debt, and on and on. For the beginner who might have only one of those requirements, approaching traditional lending institutions feels like hitting a brick wall. 

 

Private money loans are given to new investors using the property they’re buying as collateral. There’s no need for the hoops through which traditional lenders make investors jump. Hard money lenders know they can sell the property to regain their investment. 

 

Timing Is Important

 

Hard money is perfect for the house flipping investor. Lenders know that the investor will take as little time as possible to repair the house and sell it. Lenders get their money back quicker, investors make a profit on the sale, and both move on to their next deal. This saves everyone interest payments and other fees.

 

Investors May Borrow More

 

Traditional lending institutions expect to see between five and 20 percent of the purchase price put down on a property. This gives the purchaser better mortgage terms. Those without the five to 20 percent pay more in the form of mortgage insurance as well as interest on the loan.

 

Hard money lenders are willing to give investors all of the purchase prices of the property. They lend on the basis of property value instead of traditional underwriting, so they can afford to be generous. The investor would only have to pay the origination fee and interest on the loan. 

 

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