What is a Hard Money Loan?
Simply, hard money loans allow you to borrow money using a real estate private lender instead of a bank. The definition of a hard money loan is that the real estate property serves as the “hard” asset to back the loan.
That's where the name comes from, by the way. There is a "hard" asset to back to loan, not from the loan being hard to get, or that the lender is tough!
Many real estate entrepreneurial investors who need to borrow money for their projects and are unable to get funded from their bank turn to a hard money lender to get their projects done. It is common for builders, developers, and fix and flippers to hard money for the differences—and the advantages—it brings.
Here are some advantages of hard money loans:
Unlike banks and traditional lenders, there is not a lot of paperwork or hassle. It is a simplified, streamlined process. This is particularly true with Walnut Street Finance because before we were lenders, we were builders & developers. So we know what a hassle it can be to get a loan and jump through hoops. Our goal as a lender to make it as easy as possible so financing doesn't hold up your projects.
It is not a long term loan. Think of it as a bridge loan—it gets you from the place you are now to a point where you can complete the project, so you can move on to the next one. Typically, a hard money loan from us will have a 6 month to 24 month term, depending on the type of project.
This is perhaps the most important thing to know when you are researching ‘what is hard money lending?’ Private lenders are always available to fund smart, well-thought out and professionally prepared projects. When banks aren’t lending, we are.
So what are hard money loans used for?
- Fix and Flip Projects
- Acquisition of an Investment Property
- Construction or Rehab Projects for Investors
- Rehab to Rent Projects
- Refinance Investment Properties
- Bridge Loans on Investment Real Estate Projects
In case you didn't realize it, Walnut Street Finance does NOT lend to individual home owners on properties that are their primary residence. Hard money lending is not a traditional mortgage loan.