What is hard money?

Hard money is a loan that is secured by a “hard” asset. In most cases, that asset is real estate. The most common hard money loan is for a fix-and-flip loan. If you are a real estate investor in North Carolina that is looking to flip houses, a hard money loan is a good option for you.

Traditional Financing vs. Hard Money

A traditional mortgage is a lengthy process that caters to homeowners looking to secure long-term financing. A hard money loan usually has a much shorter loan term and much higher interest rates. While a traditional mortgage is much cheaper, a hard money loan can be processed and funded much, much quicker. Traditional financing is contingent on the borrower’s creditworthiness, a hard money loan is primarily asset-based.

When would someone use a hard money loan?

An investor looking to secure real estate with the intent to develop or flip it for a profit is the typical hard money loan borrower. A hard money loan gives the investor the quickest and most convenient access to funds. At Junegrass Lending, it only takes a few days to make a lending decision and begin funding.

Convenience is not always cheap, and other financing options might be better depending on the situation. If a borrower lives in the property they want to renovate, hard money may not be the best option. If a borrower is planning to hold the property for longer than 24 months, traditional financing is likely a better option. Hard money loan terms rarely exceed 24 months because they are contingent on a quick return on investment.

What are the requirements for a hard money loan?

Hard money lenders are companies or individuals lending out private capital. This means each hard money lender will have different terms, interest rates and borrower requirements. One lender might welcome first-time borrowers while others require three or more completed flips. Most lenders will evaluate the borrower to make sure there are no recent bankruptcies or foreclosures. Most lenders will require a borrower to have “skin in the game” and bring cash to close (often 20% to 40% down payment).

Conclusion

A hard money loan is a great way to access funds that traditional financing options do not offer. When a good real estate deal pops up, an investor needs to move fast. Hard money lenders give investors a way to secure a property quickly. The speed and convenience at which hard money lenders work comes at a premium, but if done correctly, is still a great deal for a real estate investor. Proper vetting of hard money lenders should be conducted to ensure a good working relationship.

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If you are looking for a hard money loan, contact Junegrass Lending.

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