Hard money loans are yet another solution for when a borrower does not have the traditional income and credit scores needed to pass traditional underwriting processes. You can use them for either residential or commercial financing. Hard money simply refers to using the value of the asset (property) being funded in underwriting over the individual borrower’s finances. However, these loans only make sense in certain situations. Hard money loans are available through Commercial Mortgage Depot (CMD) in New York, New Jersey, Connecticut and Pennsylvania. Speak to our Clifton, NJ team about using a hard money loan to finance your property in the area today!

Hard Money Loans are an Asset-Based Financing Solution

As stated, the residential or commercial building being purchased are used to secure a hard money loan. This means if you as the borrower defaults on the loan, then the property can be seized to settle the debt. You can see how this may become a problem, especially if you have a lot of tenants or even occupy a space in the building yourself. Hard money loans have been around since the 1950’s, however, and do work in certain situations.

Typically, only private (sometimes smaller) lenders will provide hard money loans. This is because there is little regulation from state or federal oversight agencies, and so the lender can be more flexible and adapt their underwriting process for approval. The lenders are certainly taking a higher risk in doing this, so they may be very specific about what they ask during their approval process.

Hard Money Loan Pros and Cons

Hard money loans often come with short terms and higher interest rates. This is because the lenders have higher risk and may want the loan off their books in a shorter period. In fact, we have seen some that have terms of mere months to a few years. For this reason, you will more than likely must provide at least 25% down. In addition, the property will have to undergo a thorough appraisal process.

Hard Money Loan Investors

Obviously, hard money loans are risky to consider for the borrower or the lender. This means that we usually see only certain situations where people apply for this type of financing. Usually, we see:

  • House flippers
  • Contractors
  • Real estate investors
  • Others with cash on hand but may have poor credit, such as those who have previously undergone foreclosure in the past.

You may fit into one of the above categories, or, you may not. The take-away here is to do your research before taking a hard money loan. Contact our team for more ideas. We offer fast review and approval of loans and competitive pricing. Commercial Mortgage Depot (CMD) is here to help with hard money loans in New York, New Jersey, Connecticut and Pennsylvania.

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