Hard money loans have become a popular financing option for real estate investors, particularly those seeking flexibility and speed for fix-and-flips, new construction, and other ventures. But along with their growing popularity come misconceptions. Let’s debunk some of the most common myths surrounding hard money loans and shed light on the realities of this valuable financing tool.
Myth #1: Hard Money Loans Are Only for Borrowers with Bad Credit
Truth: While credit scores are a factor for traditional lenders, hard money lenders place more emphasis on the potential of the investment property and the borrower’s experience. A solid track record in real estate investing or a well-defined renovation plan outweighs a less-than-perfect credit score.
Myth #2: Hard Money Loans Come with Exorbitant Interest Rates
Truth: Hard money loans typically do have higher interest rates compared to traditional mortgages. However, the speed, flexibility, and focus on project potential can outweigh the higher interest costs for short-term investment projects.
Myth #3: There’s No Room for Negotiation with Hard Money Lenders
Truth: Hard money lenders are open to negotiation, especially on loan terms and interest rates. Coming prepared with a strong project plan, comparable property valuations, and a clear exit strategy strengthens your negotiating position. If there are set policies and less flexibility, there are often programs that offer discounts to repeat borrowers.
Myth #4: Hard Money Loans Are a Risky Gamble
Truth: While there’s always inherent risk in any investment, experienced hard money lenders thoroughly assess the property’s value and the borrower’s qualifications. They also work with borrowers to create realistic timelines and exit strategies to mitigate risk. Also, local hard money lenders can provide insight, expertise, and make connections to local contractors, refinancing lenders, appraisers, etc to help you be successful on your project.
Myth #5: You Don’t Need bring money to closing for a Hard Money Loan
Truth: While hard money loans often allow for low to zero down payments, you will typically need to provide some upfront capital. The exact down payment requirement will vary depending on the lender, the property, and your overall project plan. Even lenders that offer 100% of purchase and rehab costs, generally are not funding your fees and closings costs.
Empowering Your Real Estate Journey
Understanding the realities of hard money loans can equip you to leverage them effectively in your real estate investment strategy. CoreLend Financial can help you navigate the process. We offer a variety of hard money loan options with competitive rates and terms tailored to your specific needs. Contact CoreLend Financial today. Our experienced team can guide you through the process, assess your project, and help you unlock the potential of hard money financing to achieve your real estate aspirations.
