Private money loans are also known as hard money and it comes from private lending companies who offer loans to home buyers to buy a specific asset˳ Generally, home buyers often find these lenders by engaging a real estate investment club in their area˳ These loans are often secured by home investors˳ But unfortunately not every home-owner will be successful getting fund from a private lender˳ Here are the major pros and cons of private mortgage loans˳
This loan could be a great option for home buyers who are not able to qualify for a traditional mortgage because of less than exact credit, debt or for self-employed people who can’t always offer proof of a stable income˳ A debtor should remember that a person with a poor credit record can get a hard money loan if the project shows the profit˳
Personal loans are not paid back over 30 years like a traditional loan˳ A huge big number of private lenders expect the loan to be repaid within a very short time like as six to twelve months˳ Lenders are often looking for a very quick return for their money, and they generally are not set up to offer a loan for several years the way a typical mortgage company is˳ Homes that need extra renovations generally can’t get qualifies for conventional mortgages, no matter how better a borrower’s credit score is˳ In those cases, private money can play a very important role˳ A non-traditional lender can step in and offer to finance to get the house in sell-able condition, then flip the house˳
One major drawback of personal mortgage loans is interest rates˳ The rates of interest are much higher with a private money lending than with a conventional loan˳ Even, sometimes mortgage rates are more than double, often 12 to 20 percent per year˳ Basically, mortgage rates are very high because private lenders don’t need exact credit˳ Fund from private lenders are generally secured by the property in question, so it is usually not very important to the lender if the debtor has good credit or not˳
If you own a house that you believe is a candidate for a personal loan, the approval procedure often takes just a couple of weeks, as opposed, it takes 30 to 45 days for a conventional loan˳ For many borrowers, qualifying a loan than fast is a very good trade-off for higher interest rates˳ Generally, private money lenders don’t need a long drawn-out loan process like a conventional mortgage does˳
If you have a house and you want to rehab it, as well as you feel that you could make it better enough to boost its worth in a short time that would allow you to pay off a personal loan and replace it with a conventional sale, then applying for a private loan is a viable option˳ As long as you understand the caveats and complete your research, there has a possibility to successfully secure a property without a conventional loan˳
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