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Top Things You Should Know About Using A Hard Money Loan To Invest In Real Estate

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You might be interested in investing in real estate, but you might not have the funds to be able to do so. If this is the case, then you might be ready to start looking into some of your borrowing options. One option that you might have come across might be a hard money loan, but you might not be sure of whether or not a hard money loan is right for you. After all, many people who have never invested in real estate before don't really know much about these loans. These are some of the top things that you will probably want to know if you are interested in using a hard money loan to invest in real estate.

It Might Be Your Only Option

First of all, you should know that if you are looking to borrow money to invest in real estate, a hard money loan might be one of your only options. Taking out a typical mortgage often isn't an option if you aren't planning on living in the home as your primary residence or if you already have a mortgage, such as if you still owe money on the mortgage that you used to purchase your own home. Many people are surprised by just how few options there are for real estate investors to borrow money for properties that they plan on renting out or "flipping," but luckily, hard money loans are an option.

It Will Probably Be a Secured Loan

Typically, hard money loans are secured by real property. Basically, if you plan on taking out one of these loans to purchase an investment property, you will probably have to use the property that you're buying to secure the loan. Another option is to use another property that you own to secure the loan.

They're Usually Short-Term Loans

One big difference between hard money loans and traditional home mortgages is the fact that real money loans are usually short-term loans. You typically won't have 15 or 30 years to pay off the loan; instead, the loan term might be 5 years or fewer.

You Will Probably Need a Down Payment

Lastly, you should know that you will probably need a down payment when taking out a hard money loan, much as you would need a down payment when taking out a mortgage. The amount that you will need will vary based on things like the lender that you work with, the cost of the property that you're buying, your credit score, and more.

Talk to a hard money lender to learn about your options.