A hard money loan is a loan in which a borrower acquires funds that are secured by the value of a particular parcel of real estate. Hard money loans are by offered by hard money lenders as an alternative to conventional loans that may not be the best option for a borrower in a particular situation, such as when the borrower needs to acquire funds quickly, or if they have a bad credit score and have difficulty getting a conventional loan.
In a hard money loan, it is common for the interest rates to be higher than other types of commercial or residential property loans. Because hard money loans are also similar to bridge loans, they are usually issued to borrowers through some type of investment firm or private individual, rather than a traditional bank. However, the main difference between a hard money loan and a bridge loan is that hard money may also refer to a situation in which the real estate is being affected by bankruptcy or a foreclosure.
Hard money loans are also usually made by local, private investors. Because the loan is secured by the value of the piece of real estate, credit scores are also usually not a significant factor in determining whether the loan is viable or not. As such they are also sometimes ideal to be utilized as short-term financing for borrowers to escape the have their property foreclosed upon.
Hard money loans can sometimes be received in as little as five days, which makes these loans particularly attractive for borrowers in time-sensitive situations, such as needing extra financing in order to finish construction on a project.
Key points When Considering A Hard Money Lender
Speed & Convenience:
• Fast Closings
• No Income Verification
• No Credit Reports
• Minimum Documentation
Minimal Or No Loan Costs On:
• Loan Processing Fees
• Document Preparation Fees
• Credit Report Fees
• Prepayment Penalties in Most Cases
• Underwriting Fees
Flexible loan Terms:
• Interest-only Payments
• Maturity Up to Two (2) Years
• No Prepayment Penalties on Most Loans
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