How Commercial Hard Money Loans Differ From Traditional Loans.
Commercial hard money lenders vs Traditional lenders offer a way for people to receive a loan that do not have strong credit scores or financials. Hard money loans are secured by real estate. Many people who are buying real estate use non traditional lenders to help them pay for the purchase or refinance of their property, because these loans are much easier to qualify for than the loans of traditional banks.
Hard money or asset-based loans are used to purchase or refinance real estate. These loans can be used to buy or refinance most all commercial real-estate.
Borrowing From Commercial Hard Money Lenders
Traditional bank loans require applicants to have a very high credit scores and strong financials; asset-based financing with hard money loans requires no credit score for approvals. This is because the loan is not based on the applicant’s credit, but rather on his/her real estate property.
These commercial hard money lenders fund applicants much more quickly, usually between 1-3 weeks. This process is much quicker due to less stringent requirements in the approval process. Traditional bank loans can take months to process, and there’s always a high chance for loan denial at the last minute. On the contrary, asset-based loans offer shorter loan terms, usually ranging from 1-5 year, while traditional bank loans are usually in the 10-40 year range.
Advantages Over hard money loans vs Traditional Loans
Hard Money Loans
- You don’t need a high credit score or financials to qualify
- Loan terms are much shorter
- Easily used for a variety of property types (single family homes, Multi family, apartments, mixed use, condominiums, and more)
- Borrowers receive loans much quicker.
Traditional Loans
- You need high credit scores.
- You need strong financials.
- Long and drawn-out process causing you to lose that investment opportunity.
- Limited on the type of asset being purchased or refinanced.
Why Borrow From Non Traditional Lenders?
Commercial hard money lenders provide a great option for people wanting to buy or refinance real estate quickly, That lack high credit scores or strong financials. Hard money loans are based strictly on the asset (real-estate.)
Financing Properties With Commercial Hard Money Loans vs Traditional loans.
Buying any real estate requires one thing – having funding available for the transaction. It’s just like any other transaction; you must either have capital available or a line of credit made available to you. Additionally, financing commercial properties is a little more complicated than funding residential properties as they adhere to different regulations.
When Are Commercial Hard Money Loans vs Traditional loans Appropriate?
For some deals, commercial hard money loans are an appropriate way to get the deal underway. Hard money loans are more lenient in the kind of requirements that you normally associate with real estate financing. The collateral is the property. If you are making a purchase of a distressed property that has an inherent value, a hard money loan may be feasible while a more traditional mortgage loan may not be.
Hard money lenders may be interested in a property that requires rehab. while a more traditional lender will most likely decline such a loan application. The intent of hard money lenders is to provide bridge financing options that allows borrowers to expedite their transactions.
How Are Commercial Hard Money Loans vs Traditional loans Different Than Regular Real Estate Financing?
Commercial hard money loans usually carry a higher interest rate. Because of that, hard money loans tend to be of shorter duration. This makes it a healthy option for those looking to take advantage of short lived real estate opportunities that quickly come and go.
Is A Commercial Hard Money vs Traditional Loan The Right Way To Finance Your Project?
A hard money loan can be a perfect answer for a short term deal. It is a great solution for purchasing a commercial property with the intent of rehabilitating the structure and or flipping the building. There are other ideal borrowing situations that call for the quick turnaround of funding as provided by First Financial Depot. Such opportunities for bridge financing can be an essential element in any speculators plans for real estate purchases or refinances.