If you’re like many people who have never borrowed hard money before, you’ve probably heard a few things about it – especially if you’re interested in real estate investing. Some of those things might be complete myths, but some are likely true.
But are hard money loans more expensive than conventional loans are?
Here’s what you need to know if you’re thinking about borrowing hard money.
Are Hard Money Loans More Expensive Than Conventional Loans?
If you’re looking at the numbers, a hard money loan seems more expensive than a conventional loan does. That’s because hard money loans typically have higher interest rates and sometimes higher closing costs – but when you factor in the other benefits, they can be tremendously beneficial.
For example, hard money loans typically have shorter terms than conventional loans do. They also feature quicker approvals – sometimes funding within days – and you pay them off faster than you’d pay off a conventional loan, which means you’re paying less lifetime interest.
Conventional lenders will only provide you with 50 to 60 percent of a project’s total cost, but hard money lenders typically offer between 80 and 90 percent (and sometimes more).
The bottom line is that while you may end up paying more in total expenses than you would if you took out a conventional loan, you’ll invest less of your own money into the project overall. If you’re not sure about the financial benefits, your best bet is to talk to your financial adviser to find out what’s going to be the best solution for your needs as a real estate investor.
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