A Washington Hard Money Loan Means Fast Cash
Confusion often surrounds the definition of a hard money loan. However, the concept is relatively straightforward.
Simply put, a hard money loan is secured by real estate and funded by a private money lender. In fact, the terms “hard money” and “private money” are often used interchangeably.
Hard money loans provide an alternative source of financing that can help real estate investors build long-term wealth. Read on to learn about this valuable funding option and why investors use hard money loans.
Hard Money Loans vs. Bank Loans
So, what is the difference between a hard money loan and a traditional bank loan?
Unlike conventional financing, hard money lending decisions are based primarily on the value of the real estate being used as collateral. The borrower’s credit rating, financial profile, or employment standing are less critical. As a result, qualifying is easier and funding happens much more quickly than with a traditional loan.
Additionally, private money lenders offer flexible, customized financing solutions for real estate investors. This is especially helpful when conventional banks and funders don’t move fast enough or impose strict loan requirements. A hard money loan can provide fast cash when time-sensitive real estate investment opportunities or urgent capital needs arise.
Hard Money Loan Terms
Hard money loans are generally short-term, typically from two to five years. However, some lenders, like Gregory M. Russell, may offer extended terms of up to 16 years when it benefits the borrower.
Most often, payments are interest-only, with a balloon payment due at the end of the loan term. Longer-term direct loans – ten years or more – are more likely to be structured with principal and interest payments, paying off the loan in full over the term.
Interest rates for direct-funded hard money loans are higher than those with conventional loans, reflecting the additional risk to the lender. When points are charged, they typically range from 2% to 8% of the loan amount.
Types of Properties & Lien Positions
Some private money lenders specialize in specific types of real estate. Others, however, lend against a variety of property types, from commercial properties to raw land. While there are exceptions, most hard money loans are approved for business or investment purposes, rather than owner-occupied homes.
In most cases, private lenders require a first lien position, or first mortgage, to secure the loan.
Our Oregon Private Money Lending Guidelines
Gregory M. Russell Private Money Lending has provided trusted hard money loan services to Washington real estate investors for over three decades. Our loan guidelines include:
- Loans on all types of real estate (Non-owner occupied, business purpose loans only)
- First mortgages only
- 50% loan-to-value ratio (We will loan up to one half the value of the property)
- Loan terms from 2 years to 16 years or longer
- No prepayment penalties
- Loans up to $400,000
We’ll customize loan terms to your real estate investment project based on your available equity and repayment plan. Contact our lending team for details about interest rates and closing costs. We’re happy to answer your hard money loan questions and look forward to working with you!