A hard money loan is a specific type of financing in which a borrower receives funds based on the value of a specific parcel of commercial real estate. Hard money loans are typically issued at much higher interest rates than conventional commercial or residential property loans and are almost never issued by a commercial bank or other deposit institution.Hard money loans are meant to be a short term fix and not a long term solution. Most hard money loans will balloon in 1-2 years so make sure you plan ahead when using hard money to finance your mortgage.
Interest rates pf hard money loans are dependemt pm the real estate market and the money supply of hard money credit. Currently, rates for hard money range from 10% to 16%. Borrowers who default on hard money loans can be charged a significantly higher rate known as the "Default Rate".
Many times with Hard Money loans you will want to payoff this loan within a year or two. Typically, you do not want to hold a hard money loan for the long haul.
Hard money loans are usually a last resort and usually not only carry high rates but unfavorable terms also. Make sure you understand the terms of a hard money loan and you have exhausted all other options before entering into a contract for a hard money loan.
Hard money lenders don't report your payments to the credit bureaus. Even if you make all of your payments on time, you will not build positive credit.
Hard Money is usually an asset based loan. Most Hard Money lenders will lend a percentage of the fair market value of a property. The percentage can range from 50% to 70%. These loans are great for real estate investors, borrowers with very poor credit, and for foreclosure bailouts.
If all else fails... Your mortgage professional will have access to hard money lenders and will guide you in the right direction.
