Hard Money Lending for Dummies

hard money lending for dummies

hard money lending for dummies

What is Hard Money?

Looking for a Hard Money Lending for Dummies guide? Well, if you’re trying to get your hands on some choice real estate, but don’t have the cash or can’t get a traditional mortgage, chances are you’re going to want to know all about hard money lending for dummies. With banks continuing to tighten their rules on lending, borrows need other ways to get a hold of the money they need. One such way is by seeking out the help of hard money lenders, also known as private money lenders, with the distinction that they represent a legitimate business rather than an under-the-table loan. These loans typically have less regulation, high risk, and can be quite profitable for flipping houses in the real estate business.

What Is the Definition of Hard Money?

You may have heard the term hard money, but you may not have a clue as to what it actually means. Essentially, hard money is given to individuals based on the property that is being purchased rather than the credit worthiness of the individual. The property ultimately serves as collateral for the loan. Due to this reason, the overall loan is typically much more expensive than an average loan.

What Is the Difference Between a Hard Money Loan and a Bridge Loan?

Despite what many believe, there is actually a difference between a hard money loan and a bridge loan. A hard money loan is based on assets. As a general rule, a hard money loan is used for a project that is expected to last several months to several years. A bridge loan is very similar, as it tends to cost close to the same and have the same criteria for loan approval. A bridge loan, however, is usually for investment or commercial property that is in transition. In most cases, the buyer is unable to get traditional financing yet due to this transition. Hard money loans, on the other hand, are usually reserved for troubled financial situations, such as when foreclosure of the house is in the works.

Who Are Hard Money Loans For?

Hard money loans are perfect for real estate developers and those who partake in house flipping. This is because you can borrow as much as 100 percent of the purchase price. In some cases, hard money loans are obtained by individuals who want to buy a house, move into it, make some upgrades to it, raise the home’s value and obtain a brand new standard loan that is based on the property’s improved value. This new loan is then used to pay off the lender of the hard money loan. Overall, hard money loans are used for short-term financing, for turnaround situations and by poor credit buyers.

Who Lends Hard Money?

As a general rule, hard money lenders are private companies and/or individuals that deal strictly with this particular type of financing, particularly with real estate deals. If you have trouble finding an experienced hard money lender on your own, you may check into real estate investor club meetings in your local area, as some hard money lenders will attend these to look for potential new clients.

How Do Hard Money Loans Work?

Borrowers receive a short-term loan with a high interest rate. The loan typically lasts up to one year, but it can be extended up to five years or so. Depending on the lender, you may be required to put a certain amount of money down to show that you are worthy of repaying the loan. After all, your credit worthiness is not coming into play in determining whether you get the loan, so it is valid request. The money can typically be obtained within a matter of days.

Why Choose a Hard Money Loan?

Any time that you are in a time sensitive situation, a hard money loan is often the quickest and most effective way of resolving your problem. For example, if you are in dire need of funds, such as to pay mortgage arrears or to keep your home from being foreclosed on, a hard money loan can be very beneficial. Another situation when a hard money loan is the most appropriate option is when you are wanting to purchase a property and transform it into something completely difference, such as a residential property into an office. Most commercial lenders would prefer to wait until after the renovations have been made to issue a loan to you, whereas hard money lenders won’t mind since the loan is backed by the property.

Hard Money Lending for Dummies

When it comes to private money financing, such as a hard money loan, there is no one size fits all solution. The Hard Money Lending for Dummies guide is a great start, but if you’re looking for the best and most accurate information regarding your own finances and hard money borrowing opportunities in the state of Texas, then call up the experts at Noble Mortgage and Investments. We talk you through your options and pair you up with the best financial solution to meet your needs and restrictions. Don’t wait, call now to speak to one of our financial experts. (713) 680-8100

Hard Money Lending for Dummies | Noble Mortgage and Investments LLC