What Is A Hard Money Loan

Dated: 08/26/2019

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Unless you are investing in real estate you probably have never heard of a Hard Money Loan (or "private money loan").  Simply put a hard money loan is a short-term loan secured by real estate.  Private investors fund these loans as opposed to conventional lenders such as banks or credit unions.  Terms of the loan are usually 12 months, but may be extended to longer terms of 2-5 years.  You are required to make a monthly payments of only interest or interest and some principal with a balloon payment at the end of the term.  The amount a hard money lenders are able to lend is based on the value of the subject property.  The property may be one the borrower already owns and wishes to use as collateral or it may be one the borrower is acquiring.    A borrower can get a Hard Money Loan on almost any type of property (single family residential, multi family residential, commercial, etc.).  Interest rates vary from lender to lender but due to the risk involved for the lender they tend to be higher than conventional loans.   Rates usually range from 10-15% and also may vary depending on the loan to value ratio.

In most cases Hard Money Loans are used for: 

  1. Fix and Flips

  2. Land Loans

  3. Construction Loans

  4. If Buyer Has Credit Issues

  5. If A Real Estate Investor needs to act quickly 

How to find a Lender to work with

An easy way to find a local Hard Money Lender is to do a simple Google search in your area.  This should give you a good amount of lenders to contact and begin your evaluation! 

Another great way to find a lender is to attend local networking meetings.  Many of these meetings exist in local cities and are well-attended by local Hard Money Lenders.

It is my hope that you have found this article useful and if you have any further questions please feel free to reach out to me directly at danny@rehomepros.com 

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