In some kinds of real estate deals, hard money loans become important when the borrower needs some sort of additional secured lending option to be able to correctly finance a property.
Hard money loans can be good for individual homebuyers, but they’re often very useful for real estate investors as well.
What is a Hard Money Loan?
Essentially, hard money lending is when the borrower gets a specific type of loan with property itself as collateral. That’s why it’s called ‘hard money’ – it’s based on actual collateral value, and not just someone’s credit score. Professionals can help to explain the roles of secured and unsecured loans, and how they differ in real estate borrowing.
Hard money loans can help provide a smoother real estate deal process, or iron out certain issues when conventional financing is not adequate to help a buyer secure a property. Some might characterize a hard money loan as looking for lending “off of the beaten path,” and while that does have truth to it, since the big commercial lenders may hesitate to provide one of these types of loans, it’s rather oversimplified. Again, hard money involves a loan using property as collateral.
Some types of hard money loans are often called “bridge loans” because they fill in the gaps in a real estate deal.
Suppose that someone qualifies for a certain amount of money, but wants to buy a property that’s just a little bit more expensive on a short time frame. Traditional financing is not good at addressing those problems, but bridge loans are. Specialized lenders will add on a hard money loan that will help close the deal and play a significant role in someone’s real estate investment strategy. You can think of this as a “secondary” financing component, where the additional lending complements that initial “conventional” loan. Or, for a visual example, it’s like a situation where a small flange or fastener can help to implement a pipe joining. It’s a gap-filler in a financial sense.
At Locklin Capital, we are experienced with these types of loans and other types of real estate consulting. We are able to work with our clients to achieve goals like same-day loan qualification and successful risk mitigation analysis. Those things make a difference when parties are working toward the settlement table! Real estate deals are complex, and often require a sophistication in the process of working them out. We can help to provide the right professional support for these types of lending.