Hard Money Loans

Hard money loans are temporary, privately funded loans at much higher interest rates. Hard money loans are usually used for house flipping, and short term investments that will give large returns. These are not long term loans, and you want to make sure they are paid off quickly, as soon as your invesment property is completed or flipped. Interest rates on hard money loans are usually between 12 and 18%, and there is also usually between 2 and 5 points added to the loan.

Buying real estate with no money down is hard to do, but it is possible if you can prove that the value of the property is worth substantially more than what you are going to pay for it. One way to obtain financing for investment properties is to obtain Hard Money Loans.

Hard money loans should only be used for short term financing and real estate investing. They will only be given if the property is worth substantially more than what the amount borrowed. If a property is going to be kept for an extended period of time the Hard Money financing should only be used as a bridge loan, to bridge the gap until traditional financing can be obtained.

Occasionally homeowners in distress will get a hard money loan to do something to prevent foreclosure. Because hard money brokers generally base the loan on the value of the property and not on the credit of the borrower, they will loan to people with poor, or bad credit, if the property has significant equity.

How to Select a Hard Money Lender

When selecting a hard money lender you need to consider the time it is going to take to obtain the loan, the cost of obtain the loan, the points, interest rate, and terms.

You should also consider how liquid the cash will be, how quickly they can get it to you if you find a great deal that needs a quick closing. If the hard money lender takes several weeks to get financing to you, you're probably better off getting traditional financing, and can kiss your chances of purchasing that house at the trustee sale good bye.