Hard money financing are for loans that Do
Not meet banks or normal financing sources
underwriting guidelines and need to close FAST.
Normally are for short time periods,
usually 6 months to 2 years.
Loans to: stop foreclosures; need funds immediately;
buy out partners; pay taxes, bankruptcy workouts;
short fuse business opportunities
A hard money loan is a specific
type of financing in which a borrower receives funds
based on the value of a specific parcel of real estate,
normally 65% of current value. Hard
money loans are typically issued at much higher interest
rates than conventional commercial or residential
property loans and are almost never issued by a commercial
bank or other deposit institution and have higher
closing cost. 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 not yet qualifying for traditional financing.
Whereas hard money often refers to not only an asset-based
loan with a high interest rate, but can signify a
distressed financial situation such as arrears on
the existing mortgage or bankruptcy and foreclosure
proceedings are occurring.
- Hard Money loans are for projects that do not
meet the normal underwriting guidelines but may
offer a good investment opportunity to the borrower.
i. May need to close
in a short period of time
ii. Loan to value 65% or less
iii. Term 6 months to 2 years
iv. High interest rates and closing
costs
v. Advantage: May be only method
of closing a
commercial
transaction that requires a short
closing date.
a. Save foreclosure
b. Fast closings
vi. Loan is made on Property Value
- Bridge loans are used as a stop gap in completing
a project of purchasing the land until construction
financing is obtained.
i. Loan is based on property
value
ii. Max LTV 65%
iii. Terms 6 months to 24 months
iv. High interst rates and closing
costs
v. Can close in short period of time.
