Hard money loan vs. a mortgage loan; they are both for real estate, so what is the difference?
There is a significant difference when it comes to a real estate hard money loan vs. a mortgage loan. While the term real estate can refer to any property, a hard money loan for real estate is most commonly used to buy a commercial or property as in investment.
A mortgage loan is more typically a loan that a family or an individual will use to buy their own personal home. As you can see, there are some differences between these two varieties. These aren’t the only differences, though.
Hard money loans and mortgage loans differ when it comes to purpose. Hard money loans are often used to make money, and not as a way to find a place to live. This can happen two ways.
- If you have a business, you can use the money from the loan to buy a new property for your company. You could buy a new office building so that you can hire more employees. You could also buy a storefront to have new retail locations for people to buy your products. You could even use the money to buy a new industrial building used to make these products. The possibilities are nearly endless.
- A hard money loan is typically used by real estate investors to fix up a home and resell it. If you are good at fixing up homes, you could always be a flipper. Flippers buy rundown homes and fix them up so that they can sell them at a higher price. If this doesn’t sound good, you could just buy some rental properties and make money from the rent that you receive from your tenants.
Hard money loans are also shorter terms than a typical mortgage. Since a real estate investor in the business of flipping houses typically sells the home within a year or two for a profit, and that money is used to pay off the loan.
A hard money loan is based more on the investment opportunity. A hard money lender will look at the risks of the properties after repair value and not so much on your credit.
These are just a few difference and there are plenty more differences between what people think of when they think of a hard money loan vs. a mortgage loan. Still, these terms can be interchanged in reality. But, most typically, If you want to buy a house, a mortgage loan can help you with the purchase. If you are a real estate investor looking to invest in real estate and need a little working capital, then a hard money loan from DFW Hard Money may be the perfect solution.
DFW Hard Money is a locally owned Fort Worth hard money lender who specializes in hard money loans for real estate investors in the Dallas-Fort Worth area.
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