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Common Misconceptions About Hard Money Real Estate Loans

How much do you know about hard money real estate loans? Chances are, some of the things you know about them are based on misconceptions from other sources. To ensure you are properly informed, let’s cover some of the most common myths and misconceptions about hard money and the truths behind them.

Hard money loans are a last resort.

Hard money real estate loans are not reserved for people living paycheck to paycheck. Instead, these loans are a good option for fix and flip investors. Traditional bank loans usually won’t cover the cost of rehabbing a property, and they tend to have strict requirements with long wait times. Hard money loans, on the other hand, have flexible criteria and fast financing that allows investors to be competitive.

Hard money is expensive.

There is some truth to this statement, as hard money is more expensive than conventional financing. However, you are getting financing for a property that the banks won’t touch. Also, you are paying to get funds in a short amount of time, sometimes in as little as one week. Overall, hard money is more expensive upfront, but you will save in the long run because you can pay off the loan faster, with less interest total.

The terms on hard money loans are predatory.

As long as you work with a trusted, well-respected hard money lender like First Funding Loans, you won’t be taken advantage of. While the interest rates on these loans are more expensive than conventional loans, all of the terms are spelled out clearly for consumers. Always read through all of the documents, and if you don’t understand something, ask the lender before signing.

Hard money loans are risky.

Any time you take out a loan, you are agreeing to pay it back over a certain period of time, along with the interest. If you can’t repay the loan, then it is risky to agree to these terms and conditions. However, as long as you can abide by the terms and are able to pay back the loan on time, you are at no greater risk financing your investment with hard money.

It’s difficult to get a hard money loan.

Sometimes, we hear that hard money loans are too hard to get. Other times, we hear they are too easy to get. In reality, hard money loans fall in the middle. Lenders are more flexible because they are willing to work with people who have foreclosures/bankruptcies on their record, as well as those with poor credit and an inconsistent payment history. But this is only the case because these loans care more about the collateral - the property - than your income.

There will always be myths and misconceptions surrounding hard money loans, so it’s important to get the facts before making a decision. Hard money loans are not for everyone, but for those who are looking for quick financing for an investment property, they are a great option. To learn more about hard money loans and if they're right for you, contact First Funding Loans today.


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