Hard money lenders are loans that are specific to an asset, based on the current value of a property. These loans are typically expensive due to the inherent high risk. A hard money loan does not require income documentation. However, more information will increase your chances of approval.
These lenders help in financing commercial real estate and residential investment properties. For both you and the lender, the shorter your hard money loan term is the better. You can make the money that you originally invested in the deal if you are able to complete everything within six months.
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There are no hard lenders in the banks you might normally find. Although rates are usually between 15 and 17%, they can go as high as 20-25 percent at times. Hard money lenders don't care much about your credit history. They don't care about your past bankruptcy or employment history. Your property is what will secure you the loan.
You should not expect to get 100% financing from hard-money lenders. You'll typically get 60 to 75% of your property's value, and most lenders would like to see that you have some money for the project. You can expect closing points – anywhere from 1 to 10 points, depending on which lender you choose.
Before making a final decision, it is advisable to speak with several hard money lenders. Ask as many questions about their backgrounds and experiences in the field as possible. Private investors such as hedge funds and private equity groups or wealthy individuals are the most common hard lenders.
