A Hard Money Loan (also called Private Money Loan) is a short-term, interest-only loan that is secured by the value of the property, and it allows the purchase and repair of an investment property.
Hard Money Loans do not conform to conventional underwriting standards and are not typically offered by banks or mortgage brokers. Real Estate investors and developers commonly use these types of loans to fund their projects because they are easier and faster to obtain than traditional bank loans. Hard money loans are easier to qualify for because the lender is focused on the value of/and income generated by the subject property, rather than the background and qualifications of the borrower.
The benefit of hard money is that these loans allow much easier and faster access to cash, therefore empowering the borrower to make quick, actionable decisions, often beating out the competitive bod on choice property. Another benefit is that these funds typically provide more borrowing leverage than traditional loans, allowing Fix-N-Flip loans, Bridge loans, Rehab/Construction, Rentals, and Cash-Out loan. Real estate investors typically make a higher return on investment with hard money loans due to the fact they can finance the repairs to the property as opposed to using their cash.
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