What is Hard Money?

If you are new to the real estate arena, there’s lots of terminology that may sound unfamiliar, and that’s completely normal. Depending on the individual situation, you will need to know specific terms to make sure you are applying for the right loan for your situation.

One of these terms is hard money. Hard money is a short term loan that is backed by the property and its value whereas many other loans are based on the individual’s credit and debt to income ratio. Hard money loans are usually private loans funded by an individual investor or group of investors and tend to have higher interest rates than traditional loans. This is due to the nature of the risk and the shorter loan terms.

Why Use Hard Money?

Fixing and flipping homes has gained a lot of popularity and with that hard money loans are more popular as well. If a home is to be purchased for a flip, it would make sense to both the buyer and lender to use the home as a collateral because both parties want to flip the house quickly and make a return on their investment.

Hard money purchases are great for short term projects like a fix and flip because they don’t require all the paperwork that you have to deal with in a conventional mortgage. Your credit score is not as big of an issue so you can get approved directly with a private lender and started working in a very short time. They want to get you the money as quickly as possible, because that means you can start working to get that money back to them just as quickly.

Another reason hard money loans are great for purchases is that the loan can be customized for an individual situation. You may want flexible terms when it comes to payments because it suits your project, and this type of scenario can be discussed and agreed upon with the lender as they don’t have to follow the typical housing rules and regulations.

Contact Us Today!

Hard money loans are very useful when it comes to specific situations and can truly benefit both the borrower and the lender if used correctly. If you are considering a purchase that you can think a hard money loan would be the best route, please reach out to us at Alpine Funding Corp in Tenafly, NJ today so we can discuss your options!

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What is “Hard Money”?

A hard money loan is a certain type of financing in which funds are received by the borrower based on the value of a specific parcel of real estate. The Hard Money Loans are typically issued with a higher interest rate, higher than conventional commercial or residential property loans. They are almost never issued by a commercial bank or other deposit institutions. Hard Money loans are more expensive because they are not based on traditional credit guidelines which protect those very same banks that do not offer Hard Money. Hard Money loans are property driven and generally have a much quicker turn around.

Commercial hard money is similar to traditional hard money, but may sometimes be more expensive because the risk is higher on investment properties or non-owner occupied properties. These types of loans may not be subject to the same consumer loan safeguards as a residential mortgage may be in the state the mortgage is issued. Commercial hard money loans are often short term and therefore interchangeably referred to as bridge loans or bridge financing.

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