How to Get a Hard Money Loan

Have you ever wondered how to get a hard money loan? It’s actually not as difficult as you may think. Check out this blog post to learn more.

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Hard money loans are asset based loans that are typically used by investors for short-term financing. These loans are usually for properties that need to be renovated or repaired and the borrower needs to raise capital fast. Hard money loans are different from traditional bank loans because they are not based on creditworthiness, but on the value of the property being purchased.

Hard money lenders will typically loan up to 70% of the after repair value (ARV) of the property. So, if you are buying a house for $100,000 that will be worth $150,000 after you fix it up, you can get a loan for $105,000. The interest rates on hard money loans are higher than traditional bank loans because they are considered to be higher risk. Hard money lenders will also charge points, which are upfront fees paid by the borrower at closing. One point equals 1% of the loan amount.

If you default on a hard money loan, the lender can foreclose on your property and sell it to recoup their investment. That is why it is important to make sure you can afford the payments before taking out a hard money loan.

What is a Hard Money Loan?

A hard money loan is a real estate-backed loan where a borrower receives funds based on the value of a piece of property. Hard money loans are typically used by investors or developers who either don’t qualify for traditional financing or need to get funding quickly.

Hard money loans are often more expensive than traditional loans, but they can be easier to qualify for and faster to obtain. If you’re considering a hard money loan, here’s what you need to know.

What Is a Hard Money Loan?
A hard money loan is a short-term, high-interest loan used to finance the purchase of investment properties or development projects. Hard money loans are typically provided by private investors or companies, rather than banks or traditional financial institutions.

Hard money loans are usually provided at much higher interest rates than conventional mortgages, making them less attractive for long-term investments. However, hard money loans can be easier to obtain than traditional mortgages and can provide financing for properties in difficult-to-finance areas or with complex ownership structures.

Hard money loans are typically secured by the value of the property being financed, which means that if the borrower defaults on the loan, the lender can foreclose on the property and recoup their investment. This makes hard money loans particularly risky for borrowers, but it also makes them an attractive option for investors looking for quick funding.

The Application Process

The application process for a hard money loan is generally shorter than that for a conventional loan, but it is important to remember that this is still a loan and the lender will want to see proof of your ability to repay. In most cases, you will need to provide:

-A completed loan application
-A property valuation or appraisal
-Proof of income and employment
-Proof of ownership of the property (if applicable)
-An exit strategy, or how you plan to repay the loan


In order to qualify for a Hard Money Loan, there are a few things that you will need to have in order.

Hard Money Loans are for investment purposes only, so you will need to have a property in mind that you intend to fix and flip, or hold on to as a rental property. The value of the property will be used as collateral for the loan, so it is important that the property is worth more than the amount that you are borrowing.

You will also need to have some skin in the game, so to speak. Most Hard Money Lenders will want you to have at least 20% equity in the property, either through a down payment or pre-existing equity. This shows them that you are invested in the success of the project and gives them some security in case of default.

Last but not least, you will need to have a good credit score. This is not as crucial as the other two qualifications, but it will help you get better terms on your loan. Hard Money Loans tend to come with higher interest rates than traditional loans because they are considered higher risk, so having good credit can help offset some of that cost.

If you think that you meet these qualifications, then a Hard Money Loan may be right for you!

Types of Properties that Qualify

To get a hard money loan, you’ll need to property that can serve as collateral. This can include:
-Residential properties
-Commercial properties
-Raw land
-Many other types of property, including some mixed-use and industrial properties.

In order to get a hard money loan, you’ll generally need to have a property that has some equity and is worth more than the loan amount. Hard money loans are often used for fix-and-flip projects, where the goal is to buy a property, make repairs or renovations, and then sell it for a profit. Because hard money loans are typically short-term loans, they can be a good way to finance a project when time is of the essence.

Interest Rates

Hard money loans are notoriously expensive, with interest rates that can range from 10% to 18%—sometimes even higher. But here’s the good news: There are a few ways to get a hard money loan with a lower interest rate.

One option is to find a hard money lender who offers adjustable-rate loans. With this type of loan, the interest rate will start out high but will then adjust downward over time. This can be a good option if you expect your income to increase in the future, as you’ll be able to make lower monthly payments once your income goes up.

Another option is to get a hard money loan from a private lender rather than a bank. Private lenders often have more flexible lending terms, which can include lower interest rates. However, it can be more difficult to find a private lender who’s willing to lend you the amount of money you need.

If you’re willing to take on more risk, you could also try getting a peer-to-peer loan through a platform like Prosper or LendingClub. With these types of loans, you’ll be borrowing money from individual investors rather than a financial institution. The interest rates on these loans can be high, but they may still be lower than the rates you’d get from a hard money lender.


Hard money loans are repaid just like any other loan – with monthly payments of interest and principal. But because hard money loans are typically interest only loans, each monthly payment will be mostly interest, and very little principal. In the early years of the loan, most of your payment will go towards interest. Only in the later years will a larger portion of your payment go towards principal. But don’t worry – the loan will be repaid in full by the end of the term.

Pros and Cons

There are a few things to consider before you decide to take out a hard money loan. First, let’s discuss the pros:

Hard money loans are ideal for people with bad credit or who need the money quickly. The loans are also great for investments in distressed properties.

Now let’s discuss the cons:

Hard money loans are more expensive than traditional loans because they come with higher interest rates and fees. You may also have to put up collateral, such as property, to get the loan.


Now that you know the ins and outs of hard money loans, you can make an informed decision as to whether or not this type of loan is right for your needs. If you have questions, be sure to speak with a qualified financial professional to get help tailor-made for your unique financial situation.

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