Hard money loans are asset-based loans where a borrower receives funds secured by the parcel of real estate. Hard money loans are typically issued by private investors or companies like Sequoian Investments, Inc. Interest rates are typically higher than conventional loans because the underwriting of the loans is more liberal for out of the box or “make sense” scenarios. Typically most hard money loans are used for projects that last anywhere from a few months to a few years. Hard money loans are similar to a bridge loan in that they are a short term funding source.
The qualifying criteria for hard money loans vary widely from loan to loan due to the fact that every property and borrower is different. Credit scores, income and other conventional lending criteria are analyzed, however most of the time we primarily qualify a loan amount based on the value of the real estate being collateralized and what the property would rent for if the investors ended up owning it.
The benefits of hard money loans for borrowers are;
- Fast funding
- Equity based loans
- Make sense underwriting
Benefits of hard money loans for investors are;
- All loans are secured by real estate locally
- High returns
- Debt service underwriting
- There is equity securing the investment