Real estate investors typically use hard money loans for quick financing. Besides, commercial hard money lenders in NJ are not like traditional lenders such as banks. This type of loan product is asset-based and uses a property as collateral. Loans terms are flexible, interest rates are higher, and the approval and closing are faster. In this article, we will discuss the pros and cons of hard money loans, so you can make an informed decision when finalizing a loan for your unique needs.
Pros
Why are hard money loans progressing so quickly in popularity? Well, there are quite a few benefits that come along. The loan does not serve like traditional financing. It is not tied to your creditworthiness but the property placed as collateral.
Commercial hard money lenders in NJ are not concerned about lengthy documentation. If you need a quick financing option and can arrange for the collateral, you are good to go. Hard money loans are pretty easy to qualify for as lenders do not scrutinize your credit reports or income sources. However, you must always check the terms and conditions with the lender to know what you must ultimately expect.
If you are into flipping, hard money loans are for you. Flippers do not usually throw in cash purchases, neither does it make sense. A hard money loan is easy to obtain, which is a critical factor to consider in a hot real estate market. In addition, this is a short-term, interest-only loan for investors with poor credit history, no verifiable employment, but an investment property in mind, available at a deal-breaking price. All in all, the convenience provided by a hard money loan can be worth its weight in gold.
- Asset-based approvals
- Short-term loan
- Speed and flexibility
- Lenient eligibility criteria
- Minimal paperwork
- Quick closing
- Convenient funding, not available elsewhere
- No consideration to income, DTI, or credit history
Cons
Sure, getting a mortgage for an investment property can be difficult with traditional lenders, and hard money loans help cut your stress. However, the benefits come along with some drawbacks. Cost is the number one inconvenience. Given that the lenders take a considerable risk with hard money lending options, they may demand a high-interest rate to back themselves up. Besides, if you cannot repay the loan amount, they can seize the collateral to recoup the losses. So, most costs are kept high to protect the lender’s interests.
Also, there may be a short repayment period on loan. Ideally, the schedule ranges from a few months to a year or so. You will have to ensure that you start making a profit in the soonest time possible to be able to repay the loan. However, when you partner with an experienced and reputable commercial hard money lender in NJ, they will guide you in the best manner possible and help you strategize your investment, so you don’t default.
- Higher interest rates than banks
- Short-term financing option
- Interest-only payments
- Hefty down payment or equity
- Higher upfront origination fees
- High closing costs
The Final Verdict
Now that we have covered the pros and cons in detail, we hope you understand what hard money loans are. These do make sense to many investors but can be cumbersome to comprehend for a few. Whether or not it is a suitable financial product is ultimately up to you. What is important to appreciate is most unconventional loans come with their plus and minus points.
A hard money loan is just another alternative to a traditional loan with high potential. Most new investors assume that a bagful of cash purchases is required in real estate. But that is not true. Most experienced investors use real estate loans to keep diversifying their portfolios. When you partner with a qualified commercial hard money lender in NJ, you will be able to obtain the money you need to fund your business endeavors and thrive in this competitive scenario.
Looking For Quick Funding? Hard Money Loans From Real Estate Funding Solutions Is The Answer!
At Real Estate Funding Solutions, we are one of New Jersey’s most trusted loan professionals. We work dedicatedly to offer unparalleled services, maintaining Speed, Simplicity, and Affordability. If hard money loans suit your current circumstances, we can guide you through the process. Hard money loans come with significant advantages for commercial real estate investors, which outdo the disadvantages.
You don’t have to jump to conclusions right away. Take the time to understand your situation and then decide. You can also speak to us, and we will help you devise a suitable financial product. We are your local commercial hard money lenders in NJ, offering myriad loan options. Get in touch with us today to discuss your queries and seamlessly get you through the process from beginning to end.