| HOME
> REAL ESTATE 101
> WHAT IS HARD MONEY?
WHAT
IS HARD MONEY?
Updated
September 2, 2010
The
term "hard money" typically
refers to a very specific type of privately issued asset
based loan, usually secured by equity in real estate.
Some hard money lenders also lend against other types
of collateral such as banking instruments, account receivables,
and option contracts. Hard money loans became popular
in United States during the 1950's after the banking
industry underwent extreme reforms in credit evaluation.
Hard money loans are typically issued at much higher
interest rates than conventional real estate loans.
These loans are usually offered by non-traditional lenders
such as private funding groups and non-deposit lending
institutions. There are many different types of hard
money loans available. One type that is very popular
is the hard money rehab loan. Many
hard money lenders will provide borrowers with acquisition
and rehab funds. This enables a borrower to fix and
flip a property. Most banks will not fund these transactions.
Hard
money interest rates can range from 9% to 25%. Most
hard money lenders also charge points. One
point is one percent of the loan amount. The points
charged often can be financed into the loan or paid
at closing by the borrower. Points on hard money can
range anywhere from 1-15 per transaction but typically
range 4-8. Our fees can vary from 5-10 points depending
on the deal itself. Overall, hard money is expensive
but it's usually CHEAPER than taking on a partner.
Wooden
Nickel Funding can offer hard money loans nationwide.
If you'd like to apply for one of our loan programs
click here now.
Why
would someone use hard money?
Because most hard money lenders are
far more concerned about the real property involved
in the transaction than the borrower buying it. This
is not to say hard money lenders don't care about the
person buying the real estate, but they simply care
more about the specs of the project than typical lenders
do. Most banks and traditional lenders care more about
the borrower than the property. Hard money lenders tend
to take to opposite approach. Most hard money lenders
will loan you 40-75% of a the property's real market
value. If you have a specific or unique need, than a
hard money lender might be exactly what you need.
For
more info on Hard Money Lending
or Real Estate Investing
check out our articles in the Real
Estate 101 section.
|
