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Feb 06 2018
  • By wpengine

Where does the money come from for a hard money loan?

What does hard money mean? Where does it come from? we’ll go over all of that in this article.

First and foremost, the term¬†hard money comes from equity which the loan is based on When borrowing money to purchase real estate, a lender needs a guarantee they won’t lose money. With normal, or “soft” loans, this comes in the form of pay stubs, bank account balances, etc. With a hard money loan, the loan is based on “hard assets,” such as the property being financed, or another property in your name. Banks, and other institutional lenders don’t lend like this.

As a result, the money in a hard money loan is – in all practicality, coming from private lenders. The money for a hard money loan comes from a private lender, as opposed to larger institutions.

Who uses hard money loans

Hard money loans can be used by anyone, for anything, that is backed by a tangible hard-asset. We often see hard money loans be used for rehabs, fix and flips, initial purchases, or even other more creative scenarios. Long term investments are typically not a good idea for a hard money loan – because they can get expensive quickly. You want a hard money loan if you think you can pay it off quickly.

Who qualifies for the money in a hard money loan

Hard money loans don’t take into account credit history etc. The primary thing a hard money lender looks at – is the deal. They look at the property/real estate being purchased, and it’s value relative to the amount being lended.

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