How To Get A Hard Money Construction Loan
What Is A Hard Money Construction Loan?
Hard money construction loans are an alternative to a bank loan or traditional mortgage when financing the construction of a building, or making improvements to an existing building. Hard money is money that can be borrowed, usually from an individual or small lending company, as opposed to an institution.
Step 1 - When Is A Hard Money Construction Loan Most Appropriate?
The collateral for a hard money construction loan is the
value of the project after completion. The type of projects that use hard
money construction loans range from home construction to large commercial
Because hard money construction loans are collateral-based loans, the most important aspect of the loan is the property of the borrower, rather than their financial position. That means that hard money construction loans are appropriate for borrowers with bad credit, those who can't document income and other difficult borrowers.
Some investors or borrowers find hard money construction loans more convenient because the restrictions are much looser in comparison to traditional loans.
Step 2 - How Much Will A Hard Money Construction Loan Cost?
Borrowers interested in hard money construction loans should bear in mind that these types of loans are seen as high risk. This is reflected in their cost: a hard money construction loan can typically be four or five interest rate points above that in a traditional bank lending agreement.
Step 3 - How Do I Go About Getting A Hard Money
There are several web sites that connect those searching hard money construction loans with lenders. Real estate publications and websites are another source for hard money construction lenders.