Hard money loans are those which are secured by collateral in the form of real estate, and are typically short-term loans funded by private investors rather than through banks or other traditional lenders. Hard money loans will often have terms lasting about 12 months, although some also have a duration of two or three years.
Repayment of such loans are usually structured so that only interest is paid monthly, or interest plus some amount of principal, concluding with an end-of-term balloon payment. Hard money loans can be very advantageous for individuals or businesses who own real estate, but don’t necessarily have great credit, because the lender will generally base the amount of the loan on the value of the real estate, rather than on the credit-worthiness of the borrower.
Best deals for hard money loans
As a rule of thumb, hard money loans should be considered when there is insufficient time to go through the lengthy loan process required by conventional lending institutions like banks. The kind of deals where hard money loans have frequently worked well and proven to be beneficial in the past are land loans, construction loans, fix-and-flips, buyer credit issue situations, and quick-action real estate investments.
Best property types for hard money loans
While it is possible for almost any type of property to be used as the basis of a hard money loan, most alternative lenders tend to specialize in a particular niche property type, simply because that’s the one they have the most experience with. Since there are far more regulations which govern owner-occupied residential properties, these are often shunned by lenders, so as to avoid any legal hassle. Other than that, anything from single-family residential buildings up to vast commercial land holdings might be considered acceptable to a given hard money lender.
Who offers hard money loans?
Finding the right lender for a hard money loan might take a bit of research or inquiry, since as mentioned above, many lenders tend to specialize in particular real estate types.
With a few calls though, an ideal lender like Perfect Alliance Capital can be matched to your specific needs, and funding can be secured.