Hard Money Lending: What is it?

Hard Money Lending: What is it?

The combination of a changing economy and new bank laws and regulations has made it substantially more difficult for a bank to get its money back if an investor defaults on his or her payments. As a result of this, receiving a traditional bank loan for real estate investment is harder than it once was. Luckily, a hard money loan from a reputable private lender is an available alternative.

Hard money lenders provide loans to businesses or individuals for purchasing real estate or financing business development projects. Usually, these loans last from 6 to 24 months. The funds received by the borrower are secured by the value of the real estate. Typically, higher interest rates are associated with hard money loans compared to convention commercial property loans, but that is because of the higher risk taken by the lender.

There are a host of benefits and unique qualities that come along with choosing a hard money loan:

  • Hard money lenders work almost exclusively with real estate investors. While traditional lenders do not usually offer special programs for the real estate investor, private lenders frequently create special programs with options that fit the client’s financial needs.
  • Banks typically expect a substantial down payment of up to 20%. Hard money lenders may not require a down payment.
  • Hard Money loans are not strictly regulated when compared to traditional bank loans.
  • Receiving the funding you need is easier because private lenders tend to be much more lenient and can fund with-in weeks vs. banks funding in months.
  • You receive your loan in a much shorter period of time, which can be essential, if you are bidding on a foreclosure or estate sale property. Hard money loans allow you to act fast. A skilled hard money lender can supply your capital within days weeks. A traditional bank loan can take anywhere from 60 to 90 days to be granted.
  • Traditional lenders often charge prepayment penalties for paying off loans early.
  • Many banks will not fund rehab projects. A qualified person may be turned down if their property needs work. Hard money lenders make loans to for rehab properties.


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