You’ve probably heard the term cash-out refinance before, but what does it really mean – and what does it have to do with hard money lending?
Explaining Cash-Out Hard Money Loans
A cash-out refinance is a mortgage transaction in which the new mortgage amount exceeds the existing mortgage amount. Its purpose is to pull out equity; it’s an alternative to a home equity loan.
It’s a way for borrowers to get money out of the equity in their homes to pay down debt or make additional purchases.
Cash-Out Loans for Investors
If you own a property, either with no loan against it or with a low loan balance, you could be eligible for a cash-out hard money loan. Many people in similar situations use a hard money cash-out loan to reinvest in the real estate market, but that’s not always the case.
What to Ask Yourself to Find Out Whether a Hard Money Cash-Out is Right for You
In order to be sure you’re making the right decision, it’s a good idea to evaluate your situation before you apply for a hard money loan.
- What’s my “exit” strategy? A hard money loan is a great source of financing, but before you apply for one, it’s a good idea to have a plan for the investment and for repaying the loan.
- Is a short-term loan the right answer right now? For the most part, hard money loans last between 6 and 18 months, although the term depends on your circumstances. A hard money loan might not work for your situation, so make sure you evaluate your needs before you apply.
- How is my credit? Although hard money loans aren’t considered “traditional” loans, you still need to have a satisfactory credit score in order to obtain one. If you need to, clean up your credit report a bit before you apply; this can include paying down credit card and other debts to make your score more favorable to lenders.
- What does the ROI look like? If you intend to invest the money you get from your cash-out hard money loan, you’ll need to make sure it’s worth your while.
Do You Need a Hard Money Cash-Out Loan in Atlanta?
If you need a cash-out loan, let us know. We’ll be happy to help you get the money you need for an investment or other purposes.