So What Is a Hard Money Loan?

So What Is a Hard Money Loan?

Hard Money Lending Means Fast Cash In Your Pocket

Mystery and confusion seem to frequently surround the definition of a hard money loan.

Simply put, a hard money loan is secured by real estate and funded by a private lender. The terms “hard money” and “private money” mean essentially the same thing and can be used interchangeably. And what’s the difference between a hard money loan and a bank loan? A hard money lending decision is based primarily on the value of the real estate being pledged, rather than the borrower’s credit rating or financial condition. Consequently, qualifying is easier and the loan is funded more quickly than a conventional loan.

Hard money loan terms

Loan terms are generally short term, 2 to 5 years. However some lenders, like Gregory M. Russell, regularly make loans with terms of up to 16 years if beneficial to the borrower. Payments are normally interest-only with a balloon payment at the end of the term. Longer term loans of 10 years or more will usually have a payment consisting of principal and interest that will pay the loan off in full over the term. Interest rates are typically higher than conventional loans in order to compensate the lender for additional risk incurred with this type of loan. In most cases points are charged ranging from 2% to 8% of the loan amount.

Types of Properties and Lien Position

Some hard money lenders lend against specific types of real estate. Others will lend against almost any type of property from commercial to bare land. Although there are exceptions, most hard money lenders make loans primarily for business or investment purposes. Private money lenders normally don’t make home loans. In most cases they require a first lien position, or first mortgage in order to make the loan.

Gregory M. Russell’s Private Money Lending Guidelines?

  • Loans on all types of real estate, non-owner occupied business purpose loans only.
  • First mortgages only.
  • 50% loan to value ratio. This means we will loan up to one half the value of the property.
  • Loan terms from 2 years to 16 years or longer if desired by the borrower.
  • No prepayment penalties on any of our loans.

Call us for specific interest rates and closing costs. We’re happy to answer your hard money loan questions!