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Hard Money Lenders & Hard Money Loans

Who uses Hard Money Lenders?

You may be a candidate for Hard Money Lenders if you are suddenly faced with an exceptional opportunity and you need to make a quick decision, but your current situation does not give you any financial leeway. You’re in a position where a conventional loan is not in the picture, or you can’t wait to have a loan approved. If you need your loan fast think “hard money lenders”.

What is a Hard Money Loan?

A hard money loan is an asset based loan instrument placed with a private investor, bank, mortgage company, the Small Business Administration or a federal bank. Your credit rating and income will not be a consideration.  Hard money lenders base the loan on the asset value of property or properties alone. The lender may offer only a percentage of the collateral property’s value (Loan to Value Ratio). This type of loan is always more expensive because this type of loan is not based on traditional credit regulations which offer the investor protection from high default rates. (In addition, regulations may differ from state to state). As well as using the property to be financed as collateral, the candidate for the loan may have to use his other assets as part of the collateral.

What is the role of a Hard Money Loan Broker?

The lender may be represented by a broker who will arrange the loan. If a broker is involved the broker takes a commission called “points”: the fee for finding a lender and preparing all the paper work. In some cases there may be prepayment penalties. Interest rates can run form 11% to16% or more. These loans have a quick turn around time and generally have a one to three year term, but can be longer.

What are Bridge Loans?

One type of loan, called a “bridge loan”, usually permits you to borrow against the equity in your present home to make a down payment on a new home. Bridge loans are usually offered at a higher interest rate than conventional mortgages, have a shorter term, may require the prepayment of up to six months of interest, and involve payment of points.

What is a Commercial Hard Money Lender?

A “commercial hard money lender” lends to a business or individual representing a business or corporation. Collateral can be a business property or residential investment property. A borrower’s residence may be considered as collateral as well. This form of security, including a personal residence as part of the collateral, is called a blanket mortgage.

There are also funding sources called “high risk lenders” who provide loans in situations that are too risky for banks and conventional mortgage companies. These lenders generally finance only 70% of the amount needed. These loans will be short term, high interest rate and require multiple points to close the loan. These lenders are normally private equity lenders who deal with borrowers who have bad credit or cannot verify their income.

What Are Subprime Lenders?

“Sub Prime Lenders” are contacted by borrowers who cannot receive funding from banks and conventional mortgage companies. Credit scores between 500 and 619 often necessitate calling on a sub prime lender. The purpose of the loan may also enter into the process. A loan for a primary residence may be easier to finance. Interest rates are higher the lower the credit score, and the smaller the down payment.

Hard Money Lender and Mortgage News

What the Fed said: A translation
Here is a translation of the Federal Reserve's surprise rate policy statement.


 

Hard Money Loans are generally available to finance the following: dealer inventory, equipment purchases, leveraged buy outs, employee buyouts, retail, offices, warehouses, dry cleaners, gas stations, casinos, strip malls, manufacturing plants, restaurants, casinos, country clubs, manufacturing plants and a host of other projects.

Disclaimer: The hard money loan calculators found on this website are offered only to estimate monthly loan payments. No guarantee is offered or implied as to their accuracy. Hard money loans are non conforming, they do not conform to the underwriting guidelines of Fannie Mae or Freddie Mac. Each private equity hard money lender has their own fee structures which may include points at closing and early prepayment penalties. Discuss all of the details of your particular hard money loan including all costs and fees with your selected hard money lender.