Thursday, February 9, 2012

Hard Money-What is it and how to get it

Hard Money is a term for a loan product offered by private companies instead of the banks. It is also referred to as Private money, Private lending, and Bridge money. Usually the capital comes from private investors that live locally to where the loans are being made. Although the loan process is similar to a bank, there are distinct differences.

First let’s compare bank money with hard money:

Bank Money Drawbacks
Bank Money Benefits
Hard to get
Low interest rates: 4-6%
Takes a long time (45-60 days)
Low Closing Costs: 1-2% of loan amount
Minimum Credit Scores Imposed
Long Term: Up to 40 years
Property must be in good condition
Small down payment: As little as 3%
Only 4-6 loans per person
Available Nationwide
Personal Guarantee is required
Money is always available
Borrower cannot be a company
Hard Money Drawbacks
Hard Money Benefits
High interest rates: 9-15%
Easier to get and to qualify
High closing costs: 4-8%
Quicker to close: 15-30 days
Short Term: 12-60 months
Credit not as big of a factor
Limited Area: Only lend locally
Borrower Can be a company: LLC, Corp
High down payment: Up to 40%
Personal guarantee variable
Property can be in any condition
Why use hard money?
Most borrowers who use hard money do it for the following reasons:
  • They personally cannot qualify or the real estate does not qualify for a regular bank loan.
  • They do not have time to wait for a bank loan to be approved.
  • They want to borrow money with a business entity and/or do not want to personally guarantee a loan
Even though the rates can be high, hard money can be quite useful when an investor has an opportunity to buy a property for a low price and sell it for a profit. Simply put, hard money even with its drawbacks can be a great tool in providing the capital necessary to be a real estate investor.
How do find a private lender and get a hard money loan?
Please review the loan programs section of our website where you can learn more and inquire about a getting a hard money loan. Our contact information is below.
Russell Roesner
Equity Coalition President
San Francisco, CA 94104
415 680 3454

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