Hard Money Lenders

What is a hard money loan?

A hard money loan is a loan given to a real estate investor which is underwritten based off the value of the asset that it is secured by. An asset based lender also known as a hard money lender will focus primarily on the value of the property rather than the net worth or income or credit of the borrower guaranteeing the loan. Whereas conventional loans are 30 year terms, hard money loans are short 1 to 3 year bridge loans designed as a short term solution for the real estate investor to acquire the property or refinance the property until he sells it or refinances it with a permanent loan in the near future.

Why should you choose a hard money loan over a conventional loan?

There are many reasons but the most important ones are the following:

(1) Quick Closing Time Frame– Conventional banks can not close a loan in less than 45 days on a single family residential property due to the disclosure and TRID guidelines to follow and a conventional commercial lender will take any where between 60–90 days to finance a commercial loan. However, a hard money loan will close within 7–14 days.

(2) The Property Requires Rehab or Repairs– Conventional banks will not lend on uninhabitable properties that need repair. Therefore a real estate investor will use a hard money lender to purchase, rehab and fix the property in order to qualify it for a conventional loan. Another example would be a commercial property that has no tenants or has a very low occupancy rate… a bank won’t loan until the property is leased up or at least has some pre-lease traction.

(3) No Income & Credit Requirement – Conventional banks rely on a borrower’s credit score, income, and DSCR/DTI.

What are the interest rates involved in hard money loans?