When most people think of hard money lending situations, they think of borrowing the money to purchase a home you intend to use as an investment. However, this isn’t the only use for this type of loan. In fact, you can also use them for certain construction projects. The benefit of choosing these types of loans over traditional loans is you can borrow an amount based on the potential value of the completed project rather than the current value of the home.
Why Hard Money Lending Is Better
If you seek a traditional loan for your construction project, you will be severely limited based on the current value of your property and how much equity you have. Hard money lenders often operate differently. These individuals are more interested in the investment potential of a property and are thus more likely to lend you a larger amount based on how much the construction project is projected to increase the value of the property. They also don’t place importance on your current credit score or many of the other factors traditional lenders take into account to determine whether you qualify for a loan and for how much. These loans can be used to start a new project or complete an unfinished project you ran out of money to pay for.
How to Locate the Right Hard Money Lender
Not all hard money lenders are interested in borrowing to individuals who need the money for a construction project. This can make it a little more difficult to find the right one. First, it’s important to inquire whether they have experience in construction lending. Once you find several that offer lending for construction projects, look up reviews on third-party sites to ensure you work with an individual who has a solid reputation in the field. Once you choose a hard money lender, you will need to provide the precise details of your construction project. This can help them decide whether they are willing to take the risk of lending the money for this type of project. Once they evaluate the property, the scope of the project and the prospective increased value the project will bring, they will be able to offer the money you need to get the construction project done.
Choosing a hard money lender for your construction project is one of the fastest, easiest ways to fund this type of project. These types of loans are often easier to acquire than obtaining money from traditional lending institutions, such as banks, because they don’t look at the current value or even your credit history. They are more interested in the potential for the increase value of the property as an investment opportunity.