Hard Money Loans: the Basics

In the world of personal finance, it is no secret that there are a lot of different terms that can seem confusing. One that might make you scratch your head and furrow your brow is hard money. Hard money loans are obtained through private hard money lenders, and they can be a beneficial option to those looking for a quick turnaround. These deals are typically processed within just 7 to 14 days.

Here is a quick guide that will go over the basics of a hard money loan.

What is a hard money loan?

Simply put, this loan is a short-term loan secured by real estate. They are funded by private investors instead of credit unions and banks with the typical term of about 12 months. Your monthly rate depends on your personal agreement, but typically each month you will only have to pay interest, with a balloon payment at the end of the term.

What will the value of the loan be?

The loan value all depends on the value of the subject property in question. No matter if it is property the borrower already owns or if it is property they are acquiring, the lender will primarily pay attention to the property's value rather than the borrower's credit. Sometimes this works in the borrower's favor, as hard money loan creditors have been known to agree to a loan after the bank has already said no.

Are there specific property types that can be used?

A borrower can receive a hard money loan on basically any type of property, from single-home dwellings to commercial, industrial, and even farm land. Some money lenders specialize in one specific property type, so it is important to find a lender willing to work with your specific property.

Are some deals better to use hard money loans than others?

A hard money loan is not a good idea for all deals. Some examples where hard money can be beneficial is for obtaining additional land, home flips, construction loans, or when the buyer has credit issues. Above anything else, hard money loans are appropriate when your bank has denied your loan request, and the loan is needed in a short amount of time.

If you have any other questions concerning obtaining hard money loans in California, do not hesitate to contact Maggio Capital today.