A hard money construction loan is a short-term loan that finances a real estate construction project. Typically, the purpose behind the loan is to fund the construction of a real estate project. Hard money loans are ideal for investors or builders purchasing a property lot or tearing down an existing property for new construction. They can also serve as an important alternative for developers who need quick, accessible funds for a new construction project when a traditional loan is not an option.
Hard Money Construction Loans vs Conventional Construction Loans
Traditional real estate loans are targeted towards property owners looking to make a long-term investment. Hard money new construction loans, however, are designed for investors or builders looking to turn around a project quickly and profitably.
The biggest difference between hard money construction loans and conventional construction loans is where the money comes from. Conventional construction loans are issued by traditional lending institutions like banks, while hard money loans are provided by hard money lenders, investors, or investment groups. Hard money loans are not subject to traditional banking requirements, allowing hard money lenders more flexibility with loan terms.
What Kind of Loan is Best for Construction?
Deciding between a hard money and traditional lender construction loan depends on several factors. If you were turned down for a conventional loan for your construction project, a hard money loan could be a solid solution to fund your project. If you’re looking for more flexibility with your construction loan, hard money loans will provide that added flexibility. Hard money loans can also be approved and provided quickly, allowing you to take advantage of current opportunities without an extended wait time.
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Benefits of Hard Money Construction Loans
Fast, reliable financing is what drives success in a competitive real estate market. Because of this, new construction investors and builders can maximize their profit margins with hard money loans. While hard money construction loans have several benefits, here are the top three:
- Speed – A hard money loan will give you access to the cash you need faster. Typically, hard money loans are funded within a week, while loans from a traditional lender may not be funded for 30 days or more.
- Flexibility – Hard money construction loans provide flexible repayment options and collateral release terms. Traditional lenders offer more limited options with one-size-fits-all loan structures.
- Availability – Since hard money lenders are private investors, they have the freedom to be more flexible with loan qualifications.
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Hard Money Construction Loans in Texas and Tennessee
Loan Ranger Capital provides new construction loans for residential and commercial properties with no pre-qualification requirements, application fees, or prepayment penalties. We’re a locally-based direct lender, so we always have cash on hand and never broker or sell your loan. If you’re seeking funding for your next construction project in Texas or Tennessee, we’re here to help. Contact our team to learn more.