Hard money lenders issue short-term loans for individuals who are seeking to purchase commercial or residential real estate. Some hard money lenders also extend funds for people who are purchasing land. Most hard money lenders work in private practice and do not utilize conventional financing standards when extending credit. Most borrowers use hard money lenders as a temporary loan that will need to be repaid with an agreed upon fee schedule for the term of the loan. Hard money lenders service a particular niche of buyers who can't acquire financing through conventional methods. Now that you know what a hard money lender is, you need to understand their unique structure of extending credit.

Understanding the Loan Structure

A hard money loan is a loan that is collateralized against the quick sale value of a home or a piece of property. Many lenders have the right to be in the first lien position, noting them as a first creditor to receive remuneration in the event of a default.

If you are seeking a loan from a hard money lender, then you need to understand the unique terms utilized by most lenders. A typical hard money lender will usually lend no more than 65% of the value of a property or 80% of your purchase price. Hard money lenders usually have terms that begin at six months and go for a maximum of 2 to 3 years.

Hard money lenders are a viable option for those real estate investors who need to acquire financing for properties on a moment's notice, or who may have difficulty obtaining a loan from conventional financing methods. Hard money loans are also an option for those who may not have the best credit, since many lenders are forgiving or willing to work with individuals who have impaired credit histories.

If you or someone you know is considering a hard money loan for a real estate investment transaction, or if you’d like to learn more about the process for obtaining a hard money loan, please don’t hesitate to give us a call!