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Hard money loans are short-term finances that are sometimes used by professional real estate investors to purchase real estate. It is important to understand that experienced real estate investors know the ins and outs of hard money finance. Less experienced investors need to educate themselves on the subject of professional real estate investing so that they can make the best possible decision for their very specific real estate project.
Most real estate investors turn to hard money financing as bridging financing options between permanent financing and the purchase of a real estate property, with a lack of conventional lending services available to real estate investors in today’s conservative credit landscape.
Benefits of Hard Money Multifamily Financing
Flexible term structure, quick finance funding, and no prepayment penalties are some of the most popular benefits to getting hard money multifamily loans; This post briefly discusses some of the benefits of availing hard money loans to purchase or refinance different types of real estate.
Benefit number 1:
No prepayment penalties
It is important to understand that even the best laid plans can indeed change, hopefully for the better. The last thing a business company wants is to be penalized for its success if its business operations are going particularly well. If circumstances change and the loan is paid in full or in part before the due date, traditional financial institutions often charge hefty prepayment penalties. It is essential to understand that commercial mortgage lenders are fully committed to the success and structure of the borrower’s loan with no prepayment penalties or additional fees.
Benefit Number 2:
Flexible temporary structure
Small and medium-sized businesses are constantly adapting to meet challenging and changing market circumstances. It is essential to mention that traditional credit bureaus and banks are not that flexible. Traditional lenders take a one-size-fits-all approach to all applications in the interest of their shareholders and finance committees not to overleverage or take on too much exposure. Some of the well-known and reputable private lenders can structure the payment consistently. They can structure collateral release terms in ways that are mutually beneficial to both the lender and the borrower. Greater flexibility of finances often results in better results.
Benefit number 3:
Fast Loan Financing
It is very important to understand that it could be very difficult to try to obtain even the simplest loans from any financial institution in a subsequent economic downturn. Banks require borrowers to submit personal and business financial statements and up to 12 months of anticipated new mortgage reserves and personal expenses. This can result in unnecessary delays in loan approval. Private lenders can move quickly as they base their decision largely on the liquidation value of the collateral provided. Faster decisions mean the borrower starts moving forward with the business rather than getting stuck in financing limbo.