1. What is Hard Money Lending? Hard Money is an expression that is used for cash money. Hard money is usually provided by private investors that are looking to make a higher yield on their money and want to protect their principle by taking collateral.
2. Is a Hard Money Loan a permanent
loan? No. A hard money loan is a short term loan that lasts anywhere from 6 months to 4 years. It should be a temporary solution to your financing needs. A hard money lender will be able to structure the deal in a short period of time (usually within one week). If time is an issue, use a hard money lender to make the deal and then go to the bank to get the Permanent Financing (Perm).
3. Is there a lot of red tape with Hard Money Lenders? No. Unlike banks, which must comply with several levels of “red tape” before a loan can be made, hard money lenders base their underwriting skills on one thing, collateral. Equity is KING in a Hard Money Deal. The more equity you have in a deal the faster you will get your funding. Although Hard Money Lenders evaluate the “whole picture”, which may include reviewing personal balance sheets, the weight is put on the specific type of collateral and its potential value, not on the persons’ creditability.
4. How much money can I get from a Hard Money Lender? It depends from one lender to another. Since the risk on a hard money loan is higher, the lender protects themselves by taking a lower Loan to Value Ratio (LTV). It can range anywhere from 50% to 80% of the appraised market value of the subject property.
5. How much does a Hard Money Loan
cost? The cost of a hard money loan varies from case to case. The main factor to affect the bottom line is the interest rate. The average rate of interest charged ranges from 10% – 16% with 3 to 6 points. Rates are influenced by the risk that a private investor is taking on any given loan. Be assured that all fees, costs and associated terms will be disclosed and available for your review prior to any final lending agreement.
