The definition of "hard money" in real estate financing is basically a
non-bankable loan. Lenders are loan in on the borrowers hard assets. The term hard money is sometimes interchanged with "private loans", "private money",
"bridge loans", etc.Hard money loans are not meant to be long term solutions but rather band aids to either finance a project fast or bail out a borrower from a potentially bad situation. While they do offer a fast solution hard money loans are typically very expensive and in most cases have interest rates over 10% and require the borrower to pay additional points to the lender to fund the loan.
Hard money loans are typically sought after by borrowers in danger of foreclosure and are generally peoples last hope. While a hard money loan may bail you out of foreclosure the high interest rate may make payments as difficult to make as they were before the foreclosure started. So if you are seeking a hard money loan as a foreclosure bail out you may want to re examine your plans.
Many hard money loans will closely scrutinize your appraised value. Be prepared for a series review appraisals to be performed and have your home's value be questioned.
While conventional lending is a "credit-based" transaction, hard money and private money transactions are completely collateral-based decisions.
