Everything You Need To Know About Hard Money Loan Monthly Payments
Flipping houses can be an awesome business. You try to grab the best deals on the market, you purchase properties in dire need for renovation, you upgrade them, and then you flip them for a nice chunk of profit. As good as this plan may seem, it has a flaw that makes it difficult to implement: the lack of funding. Where are you going to find the money needed to make that initial purchase? Most probably you won’t be able to use your savings. Getting a loan from the bank may also prove to be difficult, particularly if your credit score isn’t that great. Besides, getting approved for a bank loan may take weeks, so you won’t be able to grab the best deals as you come across them.
All these lead to the point that you need to find an alternative to traditional financing methods. This alternative is a hard money loan. If you’ve never heard of it before, find out that this type of loan is perfect for the type of financing you need. There are several advantages of seeking for such a loan rather than trying to obtain a traditional loan or a mortgage.
First of all, hard money loan monthly payments consist solely from interest. You don’t need to repay your loan until you flip the house you’ve acquired. Until then, you’ll pay monthly fees representing the interest amount agreed upon from the beginning. The catch is that this type of loan is available on short term only. You may be able to obtain a term of 12 months, but not longer. However, this should be more than enough for you to buy and renovate the property, to list it up for sale, and to find the right buyer.
The good news is that you won’t need to have the best credit score in the world to qualify for a hard money loan. Lenders know that people who need such loans aren’t the best in terms of credit history, so they aren’t as strict as banks or other financial institutions. This makes the whole process much faster than the traditional one, as you won’t have to produce lots of documents and proof that you are trustworthy and able to repay this loan on time. As long as you are able to pay the hard money loan monthly payments, you’re going to be just fine. Since the value of such loans is about 70% of the estimated sale price of the renovated house, you’ll have enough of it to buy the property and to upgrade it. It’s in your best interest to do this as fast as possible. The faster you can flip it for a profit, the less money you’ll need to pay in interest and fees.
One of the drawbacks of this type of loan, though, is that it comes with relatively high initial and final fees. This is why you have to be very careful when you apply, in order to avoid paying unnecessary fees. If needed, seek for professional advice from a personal finance expert. The other issue is that you’ll need to show that you also have some money. Your contribution to the project would need to be around 30 percent of the purchasing price.
All these being said, you’ll be able to afford hard money loan monthly payments even if you don’t have a very high salary. Just do your homework before you apply for your loan and make sure you don’t ask more than what you really need to complete your project. This is a great idea for a business with a relatively low entry barrier.