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Patrick Hook, Broker-Associate

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There are plenty of images that come up when someone thinks of both hard money loans and hard money lenders. Since there is a lot of skewed information out there about hard money loans, we have broken down everything about this process so no one is left out in the cold.

What is a hard money loan?
Simply put, these loans are short-term loans secured by real estate. They are often chosen because of their quick turnaround and can be obtained even if the borrower has less-than-perfect credit. However, the trade-off is in the hard money loan rates as their interest is often quite high. Since most hard money loans can seem risky for the lender, the interest rates can be as high as 15%-18%.

So what exactly are hard money lenders?
A hard money loan is similar to an investment. Any lender -- from a group of investors to a licensed mortgage broker -- will be using their own funds to give you a loan. They secure these loans based on the value of your property, whether it is commercial or private, and will keep the property in case something happens and you are unable to pay your debts. Typically, most hard money loans are secured by property with a 30%-50% equity, so the investor is well protected.

Why should you get a hard money loan?
Hard money loans differ from traditional bank-given loans. These loans are known to be beneficial because of their quick turn-around time and are generally less of a hassle for those who don't want to deal with the bank. Generally speaking, they are advantageous for the following:

Home flippers -- If a home comes to market that could potentially be flipped within a short amount of time, a hard money loan is beneficial instead of taking out a traditional 15-year loan.

Builders -- Contractors often apply for hard money loans as they are able to pay off the loan quickly.

Those with credit issues -- People looking to purchase a home and has cash on hand for a down payment, but has been rejected by traditional banks or credit unions can apply for hard money loans to buy a property that may not be available to them otherwise.

If you are interested in speaking to hard money lenders to learn more about the process, contact us today.