Many people dream of buying and flipping homes to make extra money, but most people do not know how to get financing for these projects. If you would love to flip a house but do not have a way to get the funding, you might want to consider a hard money loan. If you do not know what this is, here is an explanation to help you learn what a hard money loan is, how they work, and how to get one.

The Basic Facts About Hard Money Loans

There is a chance that you have never heard of the term "hard money loans." Many people do not know what these are or how they work, yet these are the ideal loans for flipping properties. A hard money loan has several unique characteristics. First, it is a short-term loan. When you borrow the money from a hard money lender, they might expect you to repay the loan within six months or one year. These are not long-term lines of credit.

The second characteristic is the higher interest rate. The rate you pay for borrowing money through a hard money loan is higher than other loan types. Lenders have more risks when issuing hard money loans, and they compensate for these extra risks by charging higher rates.

How Hard Money Loans Work

People who want to flip properties apply for hard money loans. To do this, they choose a property to buy. Next, they calculate how much money they need to make the repairs on the property. Finally, they determine the home's value after the repairs. They can take this information to the lender to apply for a loan. The lender bases the decision on the potential profit from the job and the person's credit.

How to Get a Hard Money Loan

If you are interested in borrowing money to complete a project, you will need to gather the information listed above. You must bring this information to a lender and fill out an application. The lender will review the information and check your credit. From there, you will receive a response from the lender telling you whether you qualify for the loan.

Hard money loans are one example of investment property loans, and you can ask your local lender about them. If you have questions or need assistance with applying for one, contact a lender that specializes in investment property loans.