Private Lending Guide Site

All You Need To Know About Hard Money Loans


In simplest terms, hard money loan is a type of asset based loan financing wherein the borrower gets funds that's secured by real property.  Most of the time, hard money loans are issued by private companies or investors and the rate of interests are usually higher than traditional residential or commercial property loans. This is because of the reason that it has higher risk as well as short duration that come with the loan.


Many of the hard money loans are used for projects that are lasting for months to even years. As a matter of fact, this kind of loan is much like a bridge loan which has same criteria usually for lending and cost to borrowers. The major difference here is that, bridge loan is referring to investment property or perhaps, commercial property that may be in transition and does not yet qualify for traditional financing whereas hard money means not only the asset based hard money loan with high interest rate but the possibility of distressed financial situation such as arrears on existing mortgage or where foreclosure and bankruptcy proceedings occur.


All the time, hard money lenders see to it that they're in strong position and is less about borrowers and care about the property. Documentation of income - this is extremely popular reason why borrowers apply for hard loans. Just like bad credit, it is difficult to get financing if you couldn't prove your income. And for the borrower, they still need to deal with the losses from investment several years back and write off recent tax returns.


But with hard lenders however, they actually care less about the income of the borrower and know that self-employed debtors usually have more income than what they can show. Mostly, financiers of hard money would like to see solid deal and money in the bank. And after conformation that the payments to the hard money loan would be made according to the cash that the borrower has, the lender will then do the deal.


Timing - another known reason why people work with hard lenders is this. Deals could get done quickly and in fact, they can also be done within days. This timing option can make the offer stronger for buyers and having quick access to cash give buyers confidence to make plenty of low offers.


Comfort of doing business - truth is, conventional financing is a lot harder to get even if you are qualified for it. The underwriters keep on searching for ways on how they can reject the loans and as a result, it takes a while and requiring lots of documents. As for hard money lenders, it is easier to work with them and not trying to kill the deal even though they look at the same documents. You may want to check this out: