Real estate investing: hard money vs. conventional investor is not as difficult topic as it looks to be at first sight. People get confused because they cannot differentiate between the hard money loans or HML and conventional investor loans or conventional mortgages. They keep on asking questions regarding hard money loans. Here are answers to those frequently asked questions that will be of great help in understanding the real estate investing: hard money Vs conventional investor.
How to Obtain the Hard Money:
The first question is regarding the working methods of lenders of hard money loans. HML helps in real estate investing by making asset based capital available to investors. The biggest benefit is the fast pace at which these HML work. You may receive the amount in as little as three days after furnishing all required documents. You can get hard money as loans against collateral security, for both residential as well as commercial purposes. If we compare it with conventional mortgage then we will find that conventional mortgage takes about 4 to 6 weeks of time in processing.
The second but very important question is related with interest rates. In case of hard money, the interest varies with the lender. The average interest rate is between 14 % and 18 % per annum. Most of the lenders require monthly payments. For a conventional investor this rate of interest for obtaining hard money is a little bit on the higher side.
You may get hard money for real estate investing up to the 70 % of the value of the property. The amount of loan can be as little as $ 25,000 and as high as $ 1,000,000 depending upon the case. Duration of loan is from 6 months to 12 months varying with your requirements and the conditions of lender. Some people ask that is it possible to make the interest payment at the end of the loan term. Although, some lenders have this kind of provision, yet it makes your presentation week because they believe that if it is difficult for you to make the monthly interest payments then you are not eligible for getting the loan.
As we are discussing the real estate investing: hard money Vs conventional investor, it is relevant to compare the monthly payments also. For every 100,000 dollars borrowed you will have to make the monthly payment of $1166.66 in case you opt for the hard money. While for the conventional investor, it comes to $1098.00 per month. When we compare the prepayment, it is possible in both the cases. However, in case of hard money time period is a minimum of 3 months, while up to 24 months in case of conventional mortgage.
Alexander Gordon is a writer for http://www.smallbusinessconsulting.com – The Small Business Consulting Community. Sign-up for the free success steps newsletter and get our booklet valued at $24.95 for free as a special bonus. The newsletter provides daily strategies on starting and significantly growing a business.
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