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What is a Hard Money Loan?

Simply put, a hard money loan is a short-term loan secured by collateral, which in most cases takes the form of real estate. Hard money loans are funded by private investors, as opposed to conventional lenders like banks or credit unions. Unlike banks, these lenders are mainly concerned with the value of the property, rather than the borrower’s credit history.

Because of the larger perceived risk incurred by hard money lenders, their loans tend to have higher interest rates than traditional lenders, generally ranging between 10 to 15 percent. Hard money loans are generally short-term, and usually have twelve-month terms but can vary anywhere between six months and two years.

They usually require monthly payments of interest or interest plus some principal, and a balloon payment at the end of the term. Hard money lenders base the amount of their loans on the value of the subject property, either a property that the borrower already owns or the property that they are acquiring. A borrower can get a hard money loan on a wide variety of properties, including residential, commercial, land, and industrial.

 

Who is a hard money loan right for?

Hard money loans can be the right solution for people in many different situations:

  • When a real estate investor needs to act quickly
  • For buyers with bad credit
  • Fix and flips or rehab projects
  • Land loans
  • Construction loans

One of the strengths of hard money loans is the time that funds can be made available to the borrower. Instead of the lengthy process of getting approved for a traditional bank loan, which may take anywhere from 30 to 90 days, hard money lenders can supply capital within just a few days. For real estate investors competing against numerous other bids, being able to react quickly and secure capital in a short period of time can be essential, and hard money loans allow them to do this.

For many people with no credit history or bad credit, getting a traditional loan can be difficult. Lenders want to know that a borrower can repay them and getting approval for a loan can be a lengthy and bothersome process. Banks will look through an individual’s financial situation in depth and may reject a loan application for a variety of reasons. By using collateral to secure the loan, hard money lenders are able to loan money to borrowers who have bad credit, foreclosure or large outstanding debts, which would often preclude them from getting a loan from a bank or credit union.

Another benefit of hard money loans is that they can be more flexible than traditional loan agreements. Hard money lenders are not as tightly regulated as traditional lenders and are usually not subject to strict corporate policies. This allows them to negotiate terms and create repayment schedules that fit with the project or individual’s needs, as well as make loans for projects that might otherwise be turned down. Whereas banks usually expect a substantial down payment, often up to 20%, hard money lenders are able to make loans with no down payment.

Get a hard money loan in Minnesota

Hard Money LLC can help you get a loan in the Twin Cities area in only 7-10 days, without a required credit check. Funding is available as soon as the title work is completed. Loans are available to underwrite a wide variety of properties including: foreclosures, rehab properties (residential and commercial), commercial real estate, unoccupied residential property, vacant land, and many more. Contact us to get started with your hard money loan today!

Do you need a Hard Money Loan for your next real estate purchase or refinance fast?