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- Hard Money
Loan -
Unlike the name implies Hard Money financing is not
hard to secure. The term refers to the type of loan and how it is
structured with relationship to the property and borrower. The basis to
Hard Money loans is the equity in the property. The property must have a
large amount of built-in equity to satisfy the lender. Usually lenders
will only loan up to 65% of the properties value. Unlike conventional
loans the borrower's credit history, time on the job and assets may not
even be considered. Since the lending guidelines put more weight on the
properties value than the borrower's ability to pay they are protected by
the equity in the property.
The loan can be for residential or commercial
property or even raw land. The proceeds of the loan may be used for any
purpose. The rate of interest is very high compared to conventional
financing, usually 10% to 15% with 3 to 5 points being charged.
Hard Money financing has been a popular way to
finance real estate when a fast closing is needed or the property and/or
the borrower do not fit into the normal underwriting guidelines. But if
you want a quick closing, you have the cash and you don’t want the
lender poking around in your finances, you may want to consider this type
of real estate financing.
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