Private Lending and Hard Money Loans – What You Need to Know

We have many inquiries for all kinds of financing. Some have a very different understanding of what Hard Money also known as Private Money Lending is and how it works.

Here are some basics that can help you to better understand what this type of lending can and cannot do:

Real estate equity secured – always. No other collateral is considered. Some lenders are willing to use another property owned to cross collateralize the loan being made.

No loans made on primary or secondary personal residence – must be a non-owner occupant or income producing property. That is a Federal and State law.

The maturity is usually short term 12 to 24 months and ALL lender sources will want to know how you intend to “exit” the loan; sale or refinance with another lender or some other way of paying off the loan in full when it is due. No exit strategy, no loan.

Fix-n- flip, construction and rehab loans are approved based on the current and as completed value of the property. The loan-to- value ratios will vary from lender to lender. You will need to be able to pay a percentage of the purchase price or the construction/rehab to create your
equity to qualify. If you are buying the property then you will need to be prepared to have a down payment; generally 30% or more depending on the lender’s requirements. Loan amounts are always an issue because often people only need to borrow less than $100,000. Many private lenders will not make loans under that amount.

Private Lending or Hard Money Loan Questions? Contact us.