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Hard money mortgage lenders are the preferred source of real estate loans for unconventional loans that don’t fit the set guidelines of lenders and banks that follow government (FHA, VA) or agencies’ (Fannie Mae, Freddie Mac) criteria. The collateral is the primary factor that determines the investor’s or borrower’s eligibility for a hard money mortgage loan.

Common Guidelines Followed by Hard Money Mortgage Lenders

• LTV (Loan-To-Value): The LTV on a loan determines the maximum loan amount a hard money lender is willing to lend on a property. It may vary depending on the borrower’s profile and the property to be used as collateral’s profile. But typically the loan amount is restricted to no more than 70% of the property’s value. For rehab, construction, renovation and fixer-upper loan scenarios, the LTV is usually based on the After-Repair-Value (ARV)

• Loan Term (Duration): The length of the loan period can be negotiated with the hard money mortgage lender. But they definitely prefer shorter loan durations over longer loan durations. The type of property or the project can determine the amount of time the lender is willing to give on a particular loan. They loans usually last for a period anywhere from 3 months to 3 years at the most.

• Pre-Payment: Some lenders can set loan terms that charge a penalty fee  (1-6%) if a loan is pre-paid earlier than determined by the loan terms. But it is not a common feature and depends on other factors. Investors should make sure if a lender included this provision when signing hard money loan documents.

• Use of Hard Money Proceeds: The hard money funds have to be specifically used for the purpose outlined in the loan documents. Lenders usually monitor the manner in which funds are being spent and utilized on a periodic basis. Construction hard money loans that involved renovation work usually release funds only when the work is undertaken and completed. Builder’s involvement along with receipts and inspection might be mandatory.

• Interest Rates: Interest rates charged on a hard money loan can vary from lender to lender depending on the riskiness of the project being financed. The typical range is 10-20% per year. Most of the hard money mortgage lenders usually collect interest rate as a part of the final loan payoff. Some lenders just collect interest-only payments if the hard money loan is of a longer term.

• Loan Size or Amount: Private hard money mortgage lenders finance anywhere from $50,000 to $100+ million depending on the project scope and size. The loan amounts involved must be large if the property or project being financed requires an international hard money loan.

• Collateral (Property Types): All types of residential properties (single-family homes, condos, multi-family homes with less than four units) and commercial properties (offices, apartment buildings, retail structures, health-care facilities, shopping malls, strip malls, industrial buildings, parking lots etc) can be used as collateral for hard money mortgage loans.

Advantages of Hard Money Mortgage Lenders:

• Residential hard money loans and commercial hard money loans can be financed. They also finance business hard money loans along with several unconventional situations involving bridge financing, rehab loans etc.

• The loan processing time is minimal. If the investor is faced with a time sensitive deal, working with a hard money mortgage lender can save the deal as they usually have fast turn around times. They can issue loan commitment in a day with closings in less than a week.

• Credit challenged or bad credit investors can also avail loans without much problem if there are other compensating  factors in their loan profile.

Finding the Right Hard Money Lender for your Mortgage?

Finding the right lender for your mortgage loan can make a big impact on the project’s profitability. In our database, we have compiled an extensive list of hard money lenders organized by the property types, assets types, lending area and standard guidelines to aid you in your search for a suitable lender for your specific loan scenario. Browse through it to find a lender that matches your requirements or fill out the application form to be contact by the appropriate hard money mortgage lender.

Cultivating a good working relationship with lenders and private money mortgage investors is a must to succeed as a real estate investor in the long run. So make every effort to stick to loan terms and complete projects on time.