A Hard Money Loan Explained
So you’ve finally found yourself the perfect Phoenix investment property!
Either a residential property, commercial building, a four-plex with great renting advantages, or a perfect piece of land to start building on.
There is just one problem standing in your way: That darn piece of property you were forced to foreclose on due to the “Great Recession” housing bust!
Or perhaps you had a slightly better advantage and were able to squeak away with a short-sale.
Either way, the banks aren’t exactly jumping through hoops anymore to do you any favors!
Not to mention that they have been tightening their belts on approving new loans, and making it more difficult (even for Investors) to even think about getting a new mortgage these days.
Things aren’t as easy as they used to be!
Yet who can blame them?
They have a bad taste in their mouths and have been burned too many times to count, so now it’s IMPERATIVE that they play things safe.
But fear not, there is still a solution! It may be a little more costly, but there are definite advantages to getting a Hard Money Loan in the Phoenix area, even in this current economic downturn. I will outline for you some of the benefits and the risks.
However, I plan to show you exactly why one of these loans is well worth the money for the purpose it serves.
Let’s start with the downfalls. Hard money is surely not the cheapest way to go, but sometimes it is the ONLY way.
The loans come with a high interest rate anywhere from 12% to 18% typically, and between 1 and 3 points.
You may find a lender that’s cheaper, but you also have to consider things like their customer service, and how experienced they are in the business.
On May 1st 2011, Freddie Mac started requiring investors to own the property 120 days before refinancing.
Previously, you could refinance after a period of only 30 days.
Now, let’s talk about the potential upside of private money loans.
A typical bank loan requires a payment anywhere from 20-25% of the money down, and you will have to come out of pocket for any other expenses occurred to renovate the property.
Alternatively with a hard-money loan, the investor could pay for the incurred costs of the renovations and only pay 10% down for the property.
How good does that sound?
Also, Hard Money Lenders are available to loan within 24 hours, in many cases.
How long would it take to get approved by a bank?
And once the property has been acquired and renovated using the hard money, the value of the property has been presumably increased.
This allows you to now use a conventional lender to permanently finance, because now they can lend based on the newly appraised value.
In the best case scenario, the appraisal will be high enough to cover the cost of the hard money loan balance, as well as the closing costs, without any more money coming out of pocket.
I hope you can now see the benefits to getting a Private Money Loan in Phoenix, Arizona.
It can not only be used for residential purchases, but commercial property investments as well.
It’s a great alternative in many cases to use when going for an REO, a Foreclosure, or when dealing with a Trustee Sale. Investors, General Contractors, and in some cases even homeowners can reap the benefits and win, even in a distressed situation.
LM2 Investments provides hard money loans is as little as 24 hours, and serves all of Arizona.
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