A hard money loan is a loan provided by a private person or entity, not a traditional lender.
People usually go to this form of financing because they can't get a loan from a regular lender.
Hard money can have several advantages:
-speed in making a loan decision
-able to lend in unusual circumstances
These loans usually come at a higher interest rate, usually much higher.
These loans can often be temporary loans until someone can switch over to a different loan.
These types of loans can be used for:
-construction loans
-just land
-cash out refinances
-bridge loans
Construction loans are not done by many lenders who do mortgages. It is a specialized area of finance.
Construction loans can include pre-start loans, spec builder loans, manufactured homes, and renovation projects.
Land loans include rural properties, large land properties, development land. Many mortgage lenders will not lend on houses that are situated on unusually large plots of land. Rural properties that are manufactured homes that are attached to the land are often not considered single family residences by many lender guidelines.
Cash out refinances are done in circumstances where getting a traditional refinance can take too long or it not an option. Hard money lenders will usually lend on the basis of collateral and not credit. A person with bad credit and lots of equity can turn to this option. This type of refinance can also be done on rental properties where many lender guidelines are stricter than they are on primary residences.
Bridge loans are temporary loans that will be repaid quickly. They are usually for a much higher rate but are paid off quickly, usually with the proceeds of a newer loan.
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