Receive regular updates via email

What’s so hard about hard money?

The concept of hard money can be hard to understand, but it is a lot easier if you start with the basics. First, hard money refers to a loan that has most of the following characteristics:

  • The lenders are investors rather than banks.
  • The loans are used by real estate investors.
  • The cost (interest rates and fees) are typically much higher than for bank loans.
  • The length of the loan is typically short, for a few months to a few years rather than for decades.
  • The cost (interest rates and fees) are typically much higher than for bank loans.
  • The down payment is typically much h.
  • The loan is back by collateral like a real estate property.
  • Lenders care more about the value of the collateral than they do about the borrower’s finances.
  • The loan is based on the current value of the collateral rather than on the future earning potential of the property.
  • The approval process much quicker than the typical bank.

As with any kind of loan, both the borrower and the lender should do their due diligence. For the lender, that means checking out the value of the collateral, the borrower’s experience, and the riskiness of the deal. For the borrower, that means checking out their options to see what lender fits best with the borrower’s needs, as well as the track record of the lender. The graphic below provides an overview of the process behind a hard money loan:

infographic_hard_money_loans

Be Sociable, Share!

Tags: , , , , ,



Leave a Reply