June 4, 2019
Purchasing a home is a complicated process that can be stressful in even the most routine situations. Purchasing a property that you intend to flip is even more complicated. These types of purchases often require a different type of financing because of the nature of the property. Hard money loans can be a great solution for some buyers with special circumstances, but what exactly are they? Let’s look at hard money loans, what they are, who should utilize them, and how they are different from traditional loans.
Hard Money Loans Defined
Hard money loans are real estate loans that have a quick turnaround time and can often be obtained in more “risky” situations. These loans come with a much higher interest rate than traditional loans because they are considered more of a risk to the lender. Hard money loans also come with a much shorter loan term, typically 12-18 months, rather than traditional 15 and 30-year loans. These loans are most often used for a quick solution until other funding is secured.
Why Use a Hard Money Loan
So in what scenarios does it make sense to use a hard money loan? Most hard money loans are used for investment or flip properties. Because flip properties that need extensive renovations are generally priced low, hard money loans allow investors to move quickly on a property. Likewise, properties that are up for auction are good candidates for hard money loans because they can be obtained quickly. Additionally, since hard money loans have such short terms, investors can purchase and renovate properties quickly and resell before loan terms end, making them a great solution in these scenarios.
How to Get a Hard Money Loan
Hard money loans differ significantly from traditional mortgage loans, so it’s highly recommended that buyers work with a private mortgage company that can make decisions on a case-by-case basis. Hard money lenders don’t rely on traditional banks to fund these loans, so they are able to work more closely with the buyer to determine if the loan is a good fit.
If you are in the market to purchase and flip a property, a hard money loan may be the perfect solution for you. Give Maryland Private Mortgage a call today to discuss if this type of loan will benefit you. We are experts on hard money loans in Maryland and we’d love to answer any questions you may have!
The Maryland Private Mortgage Lending Team