When you’re searching for money to fund your development project, the options can seem endlessly confusing, if not simply endless. After all, you can choose between working with traditional banks and credit unions, a mortgage broker, a hard money lender, or – if you happen to know someone with the funds – a private lender. There are pros and cons to each option, of course, but for many developers securing a hard money loan is the quickest, simplest way of getting the funding necessary for a project. Hard money lender's like Walnut Street do have terms that differ a bit from a traditional bank or lender, but for some developers the benefits significantly outweigh the disadvantages. Let’s take a look!
The Advantages of Working with A Traditional Lender
For some investors, especially those who are looking to hold on to their property for a while – such as those looking to become landlords – working with a traditional lender might be their best option. The lower interest rates and longer repayment plans are much more conducive to property that’s held over a long period, especially if the property is in fairly reasonable shape and doesn’t need extensive repairs. The loan terms on a hard money loan are often much different than what you would find at a traditional bank. The interest rates will usually be much lower – perhaps even 9 or more points lower – which can quickly add up. You may also be able to put down a smaller down payment than if you were working with another type of lender, since many traditional lenders offer separate private mortgage insurance (PMI) on any loan with a down payment of less than 20%. For better or worse, the loan repayment period may also be a lot longer on a traditional mortgage – typically in the range of 15 to 30 years.
The Advantages of Getting a Hard Money Loan with Walnut Street Finance
Now it’s time to talk about why a hard money loan with Walnut Street Finance could be the best decision for your investment and/or development goals. First, they are perfect for those developers or investors looking to purchase distressed properties. Traditional banks often have very strict requirements about the type and condition of the properties they will lend on, but hard money lenders often specialize in lending on distressed properties since they’re experts in knowing whether or not a project has the likelihood of profitability. They also are able, typically, to close on a deal much more quickly than a traditional lender. While it may take a traditional lender a month or longer from the time an offer is pulled together until the date of closing, hard money lenders can usually close on a deal within a week or so. That expedited timeline can make or break a deal in the fast-paced world of real estate development. For investors or developers who are looking to purchase a property and perform a fix and flip to move on to the next project a hard money loan is often the ideal solution. Finally, traditional lenders generally make their lending decisions based on the borrower’s ability (or that of their co-signer) to personally repay the loan. Hard money lenders, however, make their lending decisions based on the value – or potential value – of the collateral property in question. This means that even if you, personally, aren’t flush with cash, if your project is deemed low-risk and likely to turn a profit, then you may hit less roadblocks in securing your loan.