Hard Money Loans FAQ

A hard money loan is a short-term loan secured by real estate, often used by property investors who need fast financing and don’t qualify for traditional loans.

Hard money loans are based on the property’s value, not the borrower’s credit score, and they typically have higher interest rates but faster approval processes than traditional loans. Hard Money loans give you the opportunity to buy properties faster than any bank could fund.

Interest rates for hard money loans usually range between 8% and 15%, depending on the lender, loan-to-value ratio, and risk. Rates maybe higher than bank financing, but cheaper than taking in a partner wants to take control of your project and ideas. 

Hard money loans can be used for residential, commercial, industrial, and land properties, but are most commonly associated with investment properties like fix-and-flip of all types. We can also use other forms of collateral like business equipment, trucks, cars and machines.

The LTV ratio represents the loan amount compared to the property’s value, typically capped at 60%-75% in hard money lending. In some cases you can get 100% financing, depends on the property and its value. 

Most hard money loans have terms of 6 to 24 months, though extensions may be available.

Points are upfront fees paid to the lender, usually ranging from 5% to 8% of the total loan amount. Keep in mind most closing costs are rolled into the mortgage. 

Approvals for hard money loans can be as fast as 24-48 hours, with funding in as little as a few days or weeks.

No, hard money loans focus more on the value of the property being used as collateral rather than the borrower’s credit score.

An exit strategy is a plan for repaying the loan, often through property sale, refinancing, or rental income, sba loan and bank financing. 

Yes, some investors use hard money loans for buy-and-hold strategies, though this is less common due to the high interest rates and short loan terms.

If you default on a hard money loan, the lender can foreclose on the property and sell it to recoup their investment.

Risks include higher interest rates, short repayment periods, and potential foreclosure if the borrower cannot repay the loan.

Yes, many investors use hard money loans as a bridge to secure the property, then refinance with a conventional mortgage.

A bridge loan is a short-term loan that “bridges” the gap between acquiring a property and securing long-term financing or selling the property.

Real estate investors, house flippers, and developers commonly use hard money loans to finance property purchases, renovations, or new developments. Investors that don’t want to bring in partners will take 50% of the profits and want to take control of project.

A fix-and-flip loan is a type of hard money loan used to purchase and renovate a property with the intention of selling it for profit.

Some hard money loans include prepayment penalties, but it varies by lender. Be sure to ask about this before signing.

Common fees include origination fees (points), processing fees, underwriting fees, and sometimes prepayment penalties. Many of these fees are rolled into the mortgage. 

Yes, hard money lending is legal and regulated, but laws and regulations may vary by state, so it’s important to work with reputable lenders.Our financial experts can help you plan for your future and achieve your financial goals. We offer personalized solutions to help you manage your money and build wealth.