Hard Money Lending Vs. Wholesale Commercial Mortgage – What’s the Difference?

Are you interested in investing in a property, and trying to determine what your best options for financing may be? Depending on your circumstances, there are two unique loan options available that could help you finance a property; a hard money loan and a wholesale commercial mortgage. If you are located in Conyers, Georgia, and trying to better understand the mortgage options that are most appropriate for your situation, Preferred Capital Funding can help. Read on to learn more about the differences between hard money lending and wholesale commercial mortgages.

How Does a Hard Money Loan Work?

Hard money loans are short term loans that  are issued by private lenders and are used to help real estate investors purchase a property. This is a popular type of loan for borrowers who intend to fix up a home and then resell it for a profit, (fix and flip). Loan eligibility for hard money loans differs from traditional loans in that the value of the property itself is factored in rather than a lender focusing on a borrower’s credit or ability to pay back the loan. Repayment is usually based only on the collateral property, not a borrower’s outside financial condition. Hard money loans have shorter terms that typically range between 12 and 24 months with interest only payments.

What Are Wholesale Commercial Mortgages?

In real estate, wholesaling involves finding a commercial property that is in decline and in need of renovation, putting the property under contract, and then flipping the contract for profit to another investor. Essentially, wholesalers help connect buyers to sellers, and receive a fee for that service. Wholesaling commercial mortgages can offer certain benefits, such as it allows a borrower to learn how to invest while still making a significant amount of profit and there is a lower amount of risk involved. Additionally, since wholesaling real estate is not a common practice, there is less market competition. These types of mortgages are a good choice for self-employed borrowers and real estate investors.

Determining the Best Loan Option For Your Situation

Your situation will ultimately drive your choice. If you need a quick closing, have a lower credit score, or have a past bankruptcy, a hard money loan may be your quickest path to financing. A conforming wholesale loan may be better if you have more time to close or if you want to avoid the red tape of traditional bank underwriting. Whatever your current circumstances may be, you will want to work closely with a lender to determine the most suitable financing option for your situation. If you are interested in purchasing an investment property in Conyers, Georgia, Preferred Capital Funding is here to help. Contact our office today for a consultation.