How Does A Hard Money Loan Differ From A Conventional Mortgage

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Are you looking to invest in real estate and need financing? You probably have two options before you! One of them is a conventional mortgage and the other one Is a hard money loan. Most people know the basics of a conventional mortgage. But many people wonder about hard money loans! Let’s look at some common differences between the two types of loans.

Funding source

Conventional loans are funded by conventional lenders such as larger banks or other investors. They offer loans against security. Most lenders who finance hard money loans are private ones. The funding may come from private investors, credit lines, or different kinds of investment funds. Normally, no one is sold a hard money loan. It is offered against collateral security.

Time Frame

One of the biggest differences between a hard money loan and a conventional mortgage is how long it takes for approval & disbursement. With a conventional mortgage, it usually takes several weeks or even months to close. You can typically close with real money in a week or less. It is crucial when you are buying from someone who wants to close quickly.

Interest Rate

The rate of interest on hard money loans is higher than on conventional loans or mortgage loans offered by banking institutions. Professional hard money lenders offer it for short periods. It may not exceed 1 year. Depending on the circumstances, it may be prolonged. They will collect large amounts of small interest payments over time. Hard money interest rates are also higher because the majority of the properties financed are distressed.

Property Type

Conventional lenders offering mortgage loans prefer residential properties as well as rental properties. The borrower’s creditworthiness is given more weight by these lenders. Additionally, they monitor the state of the underlying assets. A typical mortgage cannot be approved for distressed properties.

Both commercial and residential assets are financed by hard money lenders. But it is not approved on owner-occupied properties or properties being used for personal or household use. Hard money loans are designed for distressed properties and are used for flipping or refinancing and keep as a rental.

Loan Term

Most conventional mortgages have interest rates that are fixed for 30 years and are fully amortized. Hard money loans are interest-only and typically have a term of 1 year or less.

If you are wondering how to get a hard money loan in San Diego, All California Lending is here to help. They will answer your hard money lending questions. They are one of the most respected names for hard money loans in San Diego. They love to share their expertise with you, so contact them today!

Source from: https://allcalifornialending.wordpress.com/2023/01/16/how-does-a-hard-money-loan-differ-from-a-conventional-mortgage/

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