What are Typical Hard Money Loan Terms
Sep 13, 2016
Investing in real estate can be a worthwhile venture with big returns if done right. Yet it can also cause money tie-ups when you are waiting to sell off one property while eager to move on and buy the next. When money in hand is a priority, hard money loans are the financial avenue to select. Yet when choosing the right commercial hard money lender, loan terms will become the deciding factor on the lender you select.
Commercial Hard Money Loan Terms
There are typical terms for the basic hard money loan you should be aware of so you understand how much interest you will pay when you will make payments and how much of a loan amount you will receive. In addition, you can also use these loan terms to compare against the traditional commercial bank loan lenders to decide what financial route for your real estate plans is best. Several factors to take into consideration.
Shorter Term Periods
Unlike commercial bank loans that can have a 15-year to 30-year term period, commercial hard money loans have shorter time frames from 6-months up to a year or more. Most investors and developers seek out these loans to make property purchases, finance building construction or to perform repairs on commercial properties. They typically do not need long-term loans offered by banks.
Loan-to-Value (LTV) Borrowing
Commercial hard money lenders do not rely on the credit history and financial strength of the real estate investor or developer to determine the amount of cash you can borrow. Instead, hard money loans are a type of asset-based loan where you need to put something up for collateral — typically an investment property in the real estate industry.
The value of the collateral will determine the amount you can borrow and is usually a higher amount than what you would get from a traditional commercial bank loan: from 65% up to 70% LTV. In addition, the lending value will typically be based on the resale value of the property after the improvements.
Contact Us for a Hard Money Loan!