What is "hard money loan"?

**gregory** · 02-01-2008, 12:41 PM

When a seller asks for hard money loan on their listings what do they mean?

**HardMoneyDr** · 02-01-2008, 01:00 PM

Originally Posted by gregory

When a seller asks for hard money loan on their listings what do they mean?

A Hard Money Loan is a high interest bridge loan until a person gets traditional financing. For example, someone sees an opportunity to move fast on a property, but can't wait several weeks for a bank,will use hard money. Sellers like this because they view the buyer as a 'cash' buyer. There are lenders that can close in 7-10 days. The strength of the collateral and NOT the borrowers credit is usually most important to the underwriter. They will typically lend 65% of the " as is " value of the real estate as judged by their appraisal of the property. Raw land will be a much lower LTV( if you can even find a lender that will do that now) The loans are typically interest only loans with terms from 6-36 months and 12-18% plus points. Keep in mind that all due diligence fees, ie. the appraisal, the lenders attorneys fees, title fees, any background/credit checks, and any environmental reports are typically paid up front by the borrower and are not refundable if the loan does not close. If one ever considers a hard money loan, make sure you have a firm exit strategy( bank financing)in place to pay off the hard money lender.