Direct Hard Money Lenders: Want to know what Hard Money is?

What is hard money? Hard money is typically money that’s more expensive then conventional loans from a bank.
The reason it’s more expensive is that in theory the money is lent, not on the borrowers credit score or credit capacity, but instead on the property itself. That means a hard money lender may only lend 60% of the market value of the house. That means the property owner quits making the payments, then the hard money lender forecloses on the property and gets the property back, and keeps the property.

The hard money lender tries to reduce their risk by keeping the LTV (Loan to value) low enough. Most hard money lenders are going to want to lend that money to you only if they hold the 1st mortgage on the property. Typically hard money is lent on properties that need fixup and repairs. Hard money lenders like to know that the property could have value added to it. Hard money differs in it’s expense to investors. As a general rule you will pay 1-4pts on the loan for the hard money. (1pt = 1% of the loan balance) Also you will pay between 12-18% interest rate annually for hard money loans. Short term business to business hard money loans could far exceed that. The % goes up with the risk. 60% LTV with a 1st mortgage is not considered as risky, but maybe in a market where it could take months to resell the property. The money is suppose to be expensive because hard money lenders want to be paid back right away. They make money by lending it out over and over. If you see 2 pts, you may see 18% interest rate, if you see 4pts upfront, you may only see 12% interest rate. Hard money lenders have the money, so they make the rules and set the guidelines.

Many hard money lenders I talk to generally don’t have a problem lending the money out, their is a big demand for it.
Others like hard money because if you have a hot deal you need a loan for ASAP, with a quick title check, you could close in 1-3 days if needed. Getting hard money as a 2nd position or not secured by real estate is pretty hard to get, so you may want to just try your Visa or Mastercard for that. Hard money lenders want their money they lend collateralized by real estate. The hard money lender will decide if your property qualifies. They may have an appraisal done on the property. If you need a hard money lender please email me ron@minnesotainvestors.com

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