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Mountain Ridge

Hard Money Loan Overview: Quick, Asset-Based Financing

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What is a Hard Money Loan?
A hard money loan is a short-term, asset-based loan provided by private lenders or companies, often used by real estate investors for quick funding. Unlike traditional loans, hard money loans are secured by the value of the property rather than the borrower’s credit score

Advantages of a Hard Money Loan

 Quick Approval Process
Hard money loans are processed quickly, often within days, making them ideal for time-sensitive real estate deals.
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Advantage
Flexible Lending Criteria
Lenders focus on the value of the property, not the borrower’s credit score, allowing borrowers with poor credit to qualify.
Short-Term Financing
Typically used for short-term needs, such as property flipping or renovation, with loan terms ranging from 6 months to 3 years
No Prepayment Penalties
Many hard money loans do not have prepayment penalties, allowing you to pay off the loan early without additional fees.
Asset-Backed Loan
The loan is secured by the value of the property, so approval is based on the property’s equity rather than the borrower’s financial history.
Higher Loan-to-Value (LTV)
Hard money loans can offer higher LTV ratios compared to traditional loans, allowing borrowers to access a larger portion of the property’s value.

Hard Money Loan Guidelines

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Guideline
Credit Score
No minimum credit score requirement. Lenders primarily consider the value of the property and the borrower’s equity.
Down Payment Requirements
Typically 20-30% down payment, depending on the property value and the lender.
Loan Term
Short-term, generally 6 months to 3 years.
Interest Rates
Higher interest rates (typically 8-15%), reflecting the risk of the loan.
Property Standards
Often used for residential and commercial real estate, including investment properties, fix-and-flip projects, and land.
Loan-to-Value (LTV)
Lenders typically offer 60-75% LTV based on the property’s after-repair value (ARV) for rehab projects.
Repayment Structure
Monthly interest-only payments, with a balloon payment due at the end of the term.
Closing Costs
Hard money loans may come with high closing costs, including lender fees and legal expenses.
Rural Landscape View

Is a Hard Money Loan Right for You?

Best For

Real estate investors, flippers, or borrowers needing quick, short-term financing. Ideal for those who cannot get conventional financing or need fast access to funds.

Main Benefits

Quick approval, minimal requirements, and flexibility in terms of borrowing against property value make hard money loans ideal for fast real estate investments.

Considerations

Higher interest rates, short loan terms, and the risk of property loss if unable to repay.

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