HARD MONEY LENDERS: Definition, Best Lenders & How It Works

HARD MONEY LENDERS: Definition, Best Lenders & How It Works
HARD MONEY LENDERS: Definition, Best Lenders & How It Works

Hard money lenders are usually private investors or companies that deal with this type of lending.  You will not find hard money loan options at your local bank.  Hard money lenders are not subject to the same rules as traditional eligible lenders. 

This means that, for the most part, they are free to set their own rules as to what credit ratios or debt-to-income ratios they expect from their borrowers.  You can find a reliable lender who will even give you a loan if you are refused more traditional lenders. 

For hard money lenders, the most important factor is not the borrower’s creditworthiness, but the value of the property being purchased.

What Is A Hard Money Loan?

Like a traditional mortgage, a hard money loan is a secured loan that is guaranteed by the property it is used to purchase.  “Hard” part of “hard money” refers to tangible assets used to secure the value of the loan.  When a person does not repay the mortgage loan, the lender may acquire ownership of the asset to recoup its losses.

Unlike traditional mortgages or other types of secured loans, hard money loans have a fast and usually less stringent approval process, making them ideal if you need to make a purchase quickly enough.  With a mortgage to buy real estate often takes more than a month from application to closing.  Hard money loans can be closed in just a few days.

Who Need A Hard Money Loan?

Hard money loans can be appropriate if you can’t get the traditional financing to buy a property.  Because traditional lenders focus on the value of your collateral, hard money can potentially close faster than other loans. It is likely that a lender with hard money will not spend as much time as traditional lenders considering your application (although they still want to make sure you repay them). 

For example, they may not spend as much time checking your sources of income or checking your bank statement. Once you build a relationship with a lender, additional financing processes can move quickly, allowing you to close deals that others cannot.  This is useful in hot markets when objects receive multiple offers.

How Do Hard Money Lenders Work?

When you can’t or don’t want to turn to a traditional lender, a hard money loan can be an option.  These short-term loans for homeowners and real estate investors are usually provided on the basis of housing used as collateral, not your loan.

However, these loans are usually expensive and risky, especially if you are new to browsing.  Here’s what you need to know about hard money before signing a dotted line. There are short-term regular loans, such as rehabilitation or permanent loans, which have a rigorous underwriting process that can take weeks or months to approve. 

But with solid cash loans, you can get approval in just a day or a week if you meet the requirements.  Cash lenders are generally not interested in your income and credit history (many do not ask for this information at all) and instead issue home-based loans, which are then used as collateral.

Hard Money Loan Terms

As a rule, a hard money loan is a short-term loan that must be repaid within 6 months.  This is an ideal option for the real estate investor, who is engaged in short-term investments, who can quickly repair and turn real estate into profit.  Rehabilitation work needs to be done quickly and the property sold quickly, as each additional monthly mortgage payment means a reduction in profits.

The terms of a hard money loan can range from a few months to several years.  But they usually make the most sense in situations where investors intend to keep the property only for a short period.  Some hard money mortgages may involve a payout, which means that the principal amount of the loan will be paid in full to the lender at the end of the loan term. 

If for some reason you are unable to repay the loan in full, you will need to refinance the loan or pay penalties.  Because the property itself is used as collateral in a solid monetary position, the lender may acquire ownership of it if you fail to meet your obligations.

Difference Between Hard Money vs Soft Money Loans

Soft credit lenders are more focused on your credit rating.  In essence, a soft money loan is a type of asset-based financing that combines elements of hard cash loans with regular loans.  Hard money loan is a cash loan that is used for a specific purpose and with certain criteria for its repayment. 

Soft money is a cash loan that is not intended for a specific use.  There are usually more lenders with hard money than concessional ones.  This makes bank lenders an excellent source of capital for business owners and entrepreneurs.  However, there are other differences that distinguish these two that you need to be aware of.

Advantages Of Hard Money Loans

  • Hard money loans are quickly processed which makes it convenient and reduces the risk of losing investment property.  If approved, you will receive your money within a few days and will be on your way back to your investment property.
  • Hard money lenders have a lot of flexibility that gives you options for length of time and commissions that you don’t normally have.  Ordinary loans are as they are and do not offer any negotiations on terms like HML does.

Disadvantages Of Hard Money Loans

  • Hard money loans have a higher annual value, which ensures that you repay the loan in a short period of time, usually one to five years.  HMLs are not ideal for long-term commitments.
  • Your loan-to-value ratio is lower than HML because the lender wants to be sure that he will be able to get his money from the property if you do not fulfill the obligation.  Usually LTV is from 50 to 70%, and the property itself is collateral.  However, if you wish, you can pledge other property or personal belongings as collateral if they have significant equity.

Hard Money Lenders Florida

There are several hard money lenders in Florida that offer loans throughout the territory.  Some of them seem reliable with lots of positive Google reviews and professional websites.  The average loan amount is about 300 thousand.

Interest rates on hard money loans for Florida investors average about 10-14%.  The average loan term is about 20 months, which makes lenders a little softer.  The exit fee in the range of 2-4% is common, and the average LTV is around 70-75%.

Top 3 Hard Money Lenders Florida

Monroe Funding Corp

Monroe Funding Corp is a direct mortgage lender that serves Florida with a variety of products for hard money loans that meet the needs of real estate investors.  Their clients benefit from flexible conditions that meet both short-term and long-term needs. 

They do not offer credit rating requirements, fast closing, competitive prices and a good selection of programs.  They are also highly regarded by Google for added confidence.


Birchwood Loans

Birchwood is another high-ranking lender in Florida, although their information about Google My Business looks a bit unprofessional.  But don’t be fooled.  They have good customer service, provided reliable bank lenders in Florida.

Birchwood offers a quick source of lender financing for your real estate investment.  They can fund up to 60% of LTV for up to 5 years and provide only interest.


Capital Funding Financial

Capital Funding Financial is a hard money lender in Florida that specializes in fast and affordable mortgage solutions for real estate investors.  Their programs include hard money loans, rental loans, Fix & Flip and commercial loans.  They offer closure in just 7 days.


Top 3 Hard Money Lenders Houston

Houston, Texas, has a large selection of bank lenders operating in the city.  The average note issued to borrowers is about $300,000.  Interest rates on hard money loans average about 12.5%. 

The average term of release in the city is 43 months.  Expect to pay 3-4 points for creation.  Money lenders in Houston, on average, give 70-75% of the loan to the value of their transactions.

Catalyst Funding 

Catalyst Funding is a lender with hard money in Houston, Texas, offering loans throughout the Houston area.  They offer real estate rental loans, as well as short-term loans for fixation and repayment.

Whether you are an experienced real estate investor or a newcomer, Catalyst Funding will help you get started.  They offer many loan programs and have high ratings online.


Jet Lending LLC

 Jet Lending, LLC specializes in fixed and non-performing loans, leases and more.  They have provided more than 2,000 loans, making them one of the most reliable lenders in the Houston area.

Tidal Loans

Tidal Loans lends to the real estate markets of Houston, Austin and San Antonio. They offer flexible loan terms for fixation and repayment, long-term real estate loans, refinancing and new construction loans. They offer competitive rates and very reasonable loan value requirements.



Hard money loans are, in essence, the type of asset-based financing in which the borrower acquires funds secured by real estate.  Private investors and investor groups tend to act as bank lenders.

It is called “hard money” because it is harder to get and return than its counterpart soft money.  You can expect a higher interest rate on hard money loans than regular real estate loans, and many hard money loans start at 7-8%.  Of course, this is largely due to the fact that they carry a high risk for the lender and the short term of the loan itself.

Instead of looking at your credit rating, lending banks decide whether to lend you money based on the assets on which the funds will be used.  This makes it an attractive form of capital for flippers and real estate developers.

Hard Money Lenders FAQs

Is It A Good Idea To Borrow Hard Money Loans?

Hard money loans can be valuable both for first-time investors and for regular investors who are not usually eligible for a traditional loan.  With hard money loans are provided individually based on the property and experience or know-how of the borrower.  Conventional rehabilitation loans often require proof of income, assessment of available assets and debts, a good-excellent credit rating and a low debt-to-income ratio, and the application process usually takes longer.

What Is The Difference Between Hard Money Loans And Traditional Mortgages?

Hard money loans differ from traditional mortgages in several ways, including the way they are commonly used: hard money loans are more often used to buy investment property than to pay for housing.  As with other types of loans, the terms and conditions may vary depending on the lender and the agreement.

Why Should An Investor Use Hard Money Loans?

Real estate is an investment with a high return on investment.  Due to the return on investment, investors choose real estate for renovation and sale or development.  Because many real estate investments are quick to sell, you need to have the money to buy them quickly.  For this reason, investors often use HML when buying new real estate.  It is easy for an investor to get this financing, especially if he knows that he will not have a long loan.

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rocketmortgage.com – Hard Money Loans: What To Watch Out For

intrepidexecutivegroup.com – Hard Money vs Soft Money: What’s the Difference?

hardmoneyadvisor.com – Top 10 Best Hard Money Lenders Houston TX


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