What Is Private Money Lending?

Hard money loans are a common type of financing in the real estate industry. These loans provide borrowers with fast funding in the short term with fewer restrictions than traditional financing. Also known as bridge loans, hard money lending is used by real estate investors who flip houses or developers who renovate properties for sale. Hard money loans are funded by private lenders or investor groups who use equity or property as collateral.

How do hard money loans work?


A hard money loan allows a borrower to access funds for real estate transactions without going through traditional mortgage lenders. The funds come from private lenders or investors who lend funds based on the piece of real estate being used as collateral. Traditional loans from traditional financial institutions have a lot of hoops and qualifications that potential borrowers must meet. Traditional lenders consider your credit score, income, and debt-to-income ratio to determine your creditworthiness. Borrowers who have poor credit, insufficient income, or a high debt-to-income ratio face added challenges when seeking loan approval.

Private money lending is a convenient alternative for borrowers who don’t qualify for traditional financing for real estate deals. Northwest Private Lending has years of experience offering equity-based lending solutions to residential and commercial real estate investors. They offer hard money loan options for cash-only listings or properties that don’t qualify for traditional financing. The private money lenders for real estate specialize in bridge loans for investors in flip properties, foreclosures, rehab projects, renovations, refinancing, and more. Best of all, you can get approval on the same business day so you can act on time-sensitive real estate opportunities.

Who uses hard money loans?


Borrowers who don’t qualify for a traditional mortgage often opt for private money lending. Conventional mortgages have a lengthy approval process whereas private money loans can be accessed within days or weeks. Hard money loans are appropriate for short-term projects due to short loan terms of one to five years. This type of loan is used for flip projects, renovations, and financing a conventional mortgage with a lower interest rate. It’s also suitable for borrowers who don’t qualify for traditional loans and homeowners at risk of foreclosure with considerable equity.

California is home to some of the most sought-after residential properties in the United States. When it comes to knowing the ins and outs of today’s real estate market, Marc de Longeville is an immobilier Los Angeles real estate agent with years of experience. The real estate professional can find you the ideal residential property to rent or buy throughout Los Angeles, including Malibu, West Hollywood, Santa Monica, Westwood, Beverly Hills, Century City, Pacific Palisades, and Brentwood. Taking your housing search to the next level with a real estate agent means finding the luxury accommodation, historic mansion, seafront property, rustic multi-family property, or detached house of your dreams.

How do you get a hard money loan?


Traditional financial institutions don’t offer hard money loans. Potential borrowers can find lenders that specialize in this type of loan or ask for recommendations from real estate agents and investor groups. Private money loans are less regulated than traditional loans. It’s a good idea to shop around for lenders to find the best interest rate or most favorable loan term.

This type of lending does have some cons. It’s an expensive way of borrowing money due to high-interest rates and potential closing costs and other funding fees. The short loan term is also risky in the event things don’t go according to plan and you incur additional costs. Hard money lenders require borrowers to pay a down payment of 30 percent or more, higher than the average 20 percent for a traditional mortgage.