According to Wikipedia, “[a] hard money loan is a specific type of asset-based loan financing through which a borrower receives funds secured by real property. Hard money loans are typically issued by private investors or companies. Interest rates are typically higher than conventional commercial or residential property loans because of the higher risk and shorter duration of the loan. Most hard money loans are used for projects lasting from a few months to a few years. Hard money is similar to a bridge loan, which usually has similar criteria for lending as well as cost to the borrowers. The primary difference is that a bridge loan often refers to a commercial property or investment property that may be in transition and does not yet qualify for traditional financing, whereas hard money often refers to not only an asset-based loan with a high interest rate, but possibly a distressed financial situation, such as arrears on the existing mortgage, or where bankruptcy and foreclosure proceedings are occurring.”
CREDIT- Source- https://en.wikipedia.org/wiki/Hard_money_loan
But are Hard Money Loans really all that bad?
That’s a loaded question. To be quite frank, it depends on each situation. A hard money loan can benefit a Lender and Borrower if a Borrower needs cash to close quickly on a property. If the Borrower has a piece(s) of property that can be put up as collateral, then a hard money loan may be made if the terms are right for both parties. Additionally, the Borrower may have unique opportunity that includes a payoff that has been discounted or maybe the Borrower is in foreclosure. Sometimes a Borrower may need a hard money loan when the Borrower doesn’t qualify for the more traditional bank loans or a property is vacant and needs a significant amount of work.
Benefits of Hard Money Loans
Flexibility. Both Borrowers and Lenders complement each other to meet the specific needs of the particular deal. A Borrower may require different loan terms then what the Lender is offering, but the Borrower will usually pay a premium (i.e. higher interest rate, pre-payment penalty, etc). However, Lenders on a hard money transaction have the flexibility to tweak the details of the loan terms. Banks usually have more stringent restrictions and cannot offer such flexible terms.
Are you a Borrower looking to secure a hard money loan in South Florida? Are you a Lender that has a Borrower in default on a hard money loan in South Florida? You have come to the right place. Call The Law Office of Ryan S. Shipp, PLLC today @ 561.699.0399 to discuss your options. Our in-house title company Clear2Close Title & Escrow, LLC works directly with local private money lenders. We are located in Lantana Florida, we serve South Florida.Google+