How does a hard money loan work?

How does a hard money loan work?

​​A hard money loan is a type of real estate loan that is secured by property. It is typically used as a short-term loan and is often used to purchase and renovate an investment property. The loan is called "hard money" because it is typically provided by private investors or companies, rather than traditional lenders such as banks. Hard money loans are typically more expensive than traditional loans, with higher interest rates and origination fees. The lender typically looks at the deal and not the borrower. Although the lender will look at a borrowers or guarantors credit score, the lender will look at the strength of the deal primary factor in lending. The loan is secured by the property and the lender will typically require a first lien on the property. Borrowers will typically use hard money loans for a short period of time until they can refinance to a more traditional loan. Typical uses are of hard money loans are for fix and flip properties and bridge loans that need a quick closing.

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