In fact, it is the complete opposite. Experts recommend that rehabbers, or those who are involved in flipping houses, use this kind of financing for one simple reason: “Good investors look at the rate or return not on the interest rate of the loan.”
In flipping houses, you spend little to repair a house and sell it at a much higher price. For instance, if your hard money loan is based on an 18% interest rate but you will get a 75% rate of return, it will still be better to go for hard money financing, which is fast and payable on short term. Note that 18% is a common rate.
Sometimes, the interest rate is 13% and the origination fee is 5%.
Traditional loans offer much lower interest rates but these also take a lifetime to process. While traditional loans take around 30 days minimum to process, hard money loans may be approved in just days. If you build a good rapport with the lender, he could even give you cash in just two days! That’s getting cash fast and saving a good deal from being snatched by competition who already have ready money.
As we also remember, hard money is collateral-based. The collateral used here is the house the rehabber plans to buy, repair, and sell. Hard money lenders do not scrutinize a person’s creditworthiness.
Instead, they check if a borrower will make good money from the deal he wants to close using the cash he is asking for. If your loan is approved, most likely that means that your deal will yield profit and your hard money lender will also benefit from it by lending you the cash you need.
You can learn more about hard money by visiting RehabHardMoney.com. RehabHardMoney has a Frequently Asked Questions section that can educate you on this form of financing. You can also pre-qualify for loans nationwide just by filling out a form on RehabHardMoney.com. RehabHardMoney also has a section for borrowers of commercial hard money and for hard money lenders looking for prospective clients.
