How Does a Hard Money Loan Work

How Does a Hard Money Loan Work?

Published On: June 1st, 2020Last Updated: May 20th, 2020Categories: Hard Money

A hard money loan is an option for many people – especially those who don’t have time to sit around and wait for conventional financing. But how does a hard money loan work?

Here’s what you need to know.

How Does a Hard Money Loan Work?

These short-term loans are secured by real estate. Think of the real estate as collateral (because that’s what it is).

Hard money loans are funded by private investors (or, sometimes, a fund of investors) instead of conventional lenders, like banks or credit unions.

Loan terms on hard money loans are different from those you’ll find on conventional loans, too. You’re not going to take out a 30-year hard money loan. Instead, the term will be much shorter. It can even be just for a year if that’s what works for you; however, many are for terms of 2 to 5 years.

A borrower can get a hard money loan for just about any type of property. That means you may be able to get one for:

  • A single-family residential home
  • A multi-family residential home
  • Commercial land
  • A commercial building
  • Land
  • Investment properties
  • Industrial properties

Hard money loans are perfect for many situations, such as:

  • Fix-and-flips
  • Buying land
  • Investing in construction
  • When a buyer has credit problems and can’t get conventional lending
  • When a real estate investor needs to pounce on a deal

Do You Need a Hard Money Loan?

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