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What is a hard money lender?
A hard money lender is a private individual or company that offers short-term loans secured by real estate. Unlike traditional lenders, who focus heavily on the borrower’s creditworthiness and income, they prioritize the value of the property being used as collateral.
Their loan programs are popular among real estate investors, such as house flippers and rental property buyers, who need quick access to funds and flexible terms. Hard money lenders use after-repair value (ARV), the estimated value of a property after all renovations and repairs are completed, to determine the loan amount they are willing to offer. They usually lend a portion of the home’s ARV to ensure that the investment is safe and profitable.
Hard money loans typically have higher interest rates, ranging from 8% to 15% or more, and shorter repayment periods, usually between 6 to 24 months. Additional costs can include origination fees, closing costs, and points, which are a percentage of the loan amount paid upfront.
As with any secured loan, if you don’t pay back a hard money loan, the lender can take the property you used as collateral, like your house, to get their money back.
How does a hard money loan work?
If you’re a real estate investor who needs fast, flexible financing, working with hard money lenders in Dallas could be a great fit. Here’s a quick rundown of how hard money loans work:
