Traditional Mortgages vs. Commercial Hard Money Loans! Which One Should You Go For?

Commercial hard money loans vs. Traditional loans

Commercial hard money loans aren’t very different from traditional mortgage loans because they both take the property as their collateral for the mortgage to buy the property. However, the main difference is that commercial hard money mortgages are less strict on credit requirements. These requirements are lesser because lenders are independent financiers. For borrowers with bad credit to acquire the commercial hard money loans, they have to pay a higher down payment fee. In most cases, the loan is worth seventy percent to eighty percent of the value of the asset. In case the debtor defaults, the lender can seize the asset and make a 100% profit.

Traditional loans vs. Commercial hard money loans

Traditional mortgages are designed mostly for residential clients who want to purchase single-family homes. However, commercial hard money loans are used to buy properties for different purposes. Commercial hard money loans are often used to purchase entire office buildings, apartments or residential properties. These loans are important and play a vital role in the economy. In case you have a property that you bought from a constructor, most likely that house was financed using a commercial hard money loan.

How can you qualify for commercial hard money loans?

You don’t require a good credit to get financed with a commercial hard money loan. However, you should have a strong business plan to ensure that commercial hard money lenders believe that your business idea will succeed. Having a previous experience or proof that you have previously made will be of great help to your cause. The more money you can pay, the higher the chances of getting commercial hard money mortgages.

Commercial hard money loans risks

These loans are riskier than traditional loans. In case you fail to pay, you lose the down payment and the property. The financier will hold the asset and sell to get the remaining amount. Keep in mind that selling the commercial property can take time.