Hard Money Loans
Hard Money Lenders are private companies or individuals who lend out capital to fund real estate deals. The loans, called “Hard Money Loans” or “Private Money Loans” can be a significant source of financing for real estate investors needing short-term access to funds.
Hard money lenders have a variety of different rates, fees, and terms that you will need to become fully acquainted with. Rates and fees are typically much higher than conventional mortgages, usually ranging between 8 and 15% depending on the loan amount and term length. When taking out a hard money loan, you will usually pay a fee ranging between 3 and 10% of the loan amount; this fee is also known as paying “points.”
Finally, hard money lenders typically lend for only very short terms, usually between 6 and 36 months. Hard money loans should never be used in place of a regular mortgage – such as for a rental or your primary residence, unless you have a clearly defined exit strategy in place to pay the loan off within the time frame allocated.