How to Quickly Get Hard Money or Private Money for Any Loans

Hard Money is a term that is used almost exclusively in the United States and Canada where these types of loans are most common. In commercial real estate, hard money developed as an alternative “last resort” for property owners seeking capital against the value of their holdings.

A hard money loan is a specific type of asset-based loan financing through which a borrower receives funds secured by the value of a parcel of real estate. Hard money loans are typically issued by private investors or companies. Interest rates are typically higher than conventional commercial or residential property loans because of the higher risk taken by the lender. Most hard money loans are used for projects lasting from a few months to a few years. Hard money is similar to a bridge loan, which usually has similar criteria for lending as well as cost to the borrowers. The primary difference is that a bridge loan often refers to a commercial property or investment property that may be in transition and does not yet qualify for traditional financing, whereas hard money often refers to not only an asset-based loan with a high interest rate, but possibly a distressed financial situation, such as arrears on the existing mortgage, or where bankruptcy and foreclosure proceedings are occurring.

Hard money lenders are lending companies offering a specialized type of real-estate backed loan. They lend short-term capital (also called bridge loans) that provide funding based on the value of the real estate acting as collateral. Hard money lenders tend to focus on the value of the collateral property rather than than the borrower’s ability to repay based on their own personal income or assets, as is common with other lenders.Hard money lenders typically charge much higher interest rates than banks because they fund deals that do not conform to bank standards such as verification of borrower’s income, assets, or credit score.

Hard money lenders will offer a range of requirements on how much they will lend (loan to value), what types of real estate they will lend on (commercial, residential, multi-family, land) and minimum and maximum loan sizes. Hard money lenders that lend on residential property must be licensed through their state regulatory agency and through the National Mortgage Licensing System (NMLS). Borrowers should verify the lenders license through the NMLS in order to prevent problems at closing, as many states require the lender’s license number to be listed on the loan documents. Not having the license number on the loan documents could prevent the loan from closing

 

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