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What is hard money?

A hard money loan is a specific type of asset-based loan financing through which a borrower receives funds secured by the value of a parcel of real estate. Hard money loans are typically issued at much higher interest rates than conventional commercial or residential property loans and are almost never issued by a commercial bank or other deposit institution. Hard money is similar to a bridge loan, which usually has similar criteria for lending as well as cost to the borrowers. Hard money is essentially an asset-based loan with a high interest rate. The credit score of the borrower is not important, as the loan is secured by the value of the collateral property.

Many hard money mortgages are made by private investors, generally in their local areas. Typically, the biggest loan one can expect would be between 65% and 70% of the property value. That is, if the property is worth $100,000, the lender would advance $65,000–70,000 against it. This low LTV (loan to value) provides added security for the lender, in case the borrower does not pay and they have to foreclose on the property.

 
How does hard money work?

Our lender’s hard money loans are collateralized against the property for which the loan is made. Our private lenders fund in the first lien position, meaning that in the event of a default, they are the first creditor to receive remuneration.

Our hard money loans are based on a percentage of the “quick-sale value” or “purchase price at auction” of the subject property depending on the specific lender. This is called the loan-to-value or LTV ratio and typically hovers between 60 and 70% depending on which of our lenders you choose to use for your purchase. For the purpose of determining an LTV, the word "value" is defined as "today's purchase price" for some of our lenders and “current market value” for others. Your final purchase price at auction would dictate which of our private hard money lenders we would recommend to finance your purchase and finalize the transaction. Our private hard money lenders fund the transaction in 24 hours in accordance with ARS statutes associated with purchase of homes at trustee sales.

 
What are the terms?
  • Funding Fee $1000 or less depending on lender
  • 18% APR
  • 6 month loan term (extensions available)
  • 65% of current market value or 75% of trustee sale purchase price (depending on lender)
  • No Prepay Penalties
 
Want hard money?

Are you interested in using hard money to purchase trustee sales or fund your real estate purchases? This e-mail address is being protected from spambots. You need JavaScript enabled to view it to have a representative contact you within the 24 hours to discuss your specific needs and how Artisan Real Estate Group can help.

 


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