what is hardmoney

What is a Hard Money Loan exactly?

Generally accepted, a Hard Money Loan (is an asset-based loan, which means the financing is based on the Loan to Value (LTV) of the Asset. Unlike the Fix and Flip loan, it doesn’t go through full underwriting and there’s no minimum FICO requirement for the borrower, as it doesn’t have many guidelines and criteria.

This type of loan doesn’t have as many restrictions as one might think considering that it’s just money, so no more having to worry about bankruptcies, foreclosures, collections, etc.

Due to the lack of guidelines and underwriting, a true Hard Money Loan is generally capped at 65% LTV or less. For example, let’s say you have a home worth $1M, if you want $500K against it (50% LTV), you’re able to receive the money within 1-2 weeks (from day of application), commonly as a first lean position – because it’s just money. It’s normally in the form of a Bridge Loan, which is short term financing in a period of 12-24 months.

Why is Hard Money Beneficial for Investment Properties?

One of the reasons why Hard Money Loans are only used for investment properties, is due to the high cost regulations and predatory lending – you can’t put such high interest rates and cost on an owner occupied property.

In certain states, there are non-judicial foreclosure laws, which allow a Hard Money lender to get their money back quickly if the borrow defaults on the mortgage.

These foreclosure laws make the lender more comfortable doing high-risk loans, usually the money is not sold on the secondary market – the lender holds the note, they don’t sell the paper.

A true Hard Money Loan (is an asset-based loan, which means the financing is based on the Loan to Value (LTV) of the Asset. Unlike the Fix and Flip loan, it doesn’t go through full underwriting and there’s no minimum FICO requirement for the borrower, as it doesn’t have many guidelines and criteria.

This type of loan doesn’t have as many restrictions as one might think considering that it’s just money, so no more having to worry about bankruptcies, foreclosures, collections, etc.

Due to the lack of guidelines and underwriting, a true Hard Money Loan is generally capped at 65% LTV or less. For example, let’s say you have a home worth $1M, if you want $500K against it (50% LTV), you’re able to receive the money within 1-2 weeks (from day of application), commonly as a first lean position – because it’s just money. It’s normally in the form of a Bridge Loan, which is short term financing in a period of 12-24 months.

One of the reasons why Hard Money Loans are for investment properties ONLY, is due to the high cost regulations and predatory lending – you can’t put such high interest rates and cost on an owner occupied property.

In certain states, there are non-judicial foreclosure laws, which allow a Hard Money lender to get their money back quickly if the borrow defaults on the mortgage.

These foreclosure laws make the lender more comfortable doing high-risk loans, usually the money is not sold on the secondary market – the lender holds the note, they don’t sell the paper.