Hard money loans offer short-term borrowing solutions, primarily favored by real estate investors. However, they can also benefit borrowers with assets but limited creditworthiness. Here's a breakdown of what you should know.

Understanding the Mechanics of Hard Money Loans
Hard money loans are backed by the property itself rather than the borrower's creditworthiness. The property's value typically determines the loan amount and features a short repayment period, often less than a year.

These loans attract individuals looking to purchase properties for renovation and rapid resale. This arrangement benefits hard money lenders, as they anticipate prompt repayment.

Some hard money loans follow an interest-only payment structure, concluding with a substantial balloon payment. Consequently, they entail higher risk compared to conventional financing options.

Comparing Hard Money Loans with Traditional Mortgages
Hard money loans stand apart from conventional mortgages in several ways. Firstly, they boast quicker application processing and closing times. Additionally, their repayment periods are notably shorter, often spanning from 6 months to 3 years, depending on the investor terms may vary, in contrast to the more extended terms of traditional mortgages, commonly 15 or 30 years.

These loans undergo distinct underwriting processes and entail different criteria. Moreover, hard money loan interest rates typically surpass those of traditional mortgages. Unlike traditional mortgages, hard money loan approval heavily hinges on the collateral's value rather than the borrower's credit score.

Furthermore, hard money lenders generally require higher down payments, often exceeding 20% or 30%, whereas conventional mortgages may require as little as 3% down payment.

Differentiating Hard Money Loans from Soft Money Loans
Hard money loans are typically secured by physical assets such as property, with equity serving as the primary assessment criterion. These loans are generally non-recourse, meaning defaulting results in forfeiting the pledged asset.

On the contrary, soft money loans rely on the borrower's creditworthiness and are backed by their credit. Borrowers are accountable for repaying the entire borrowed sum, and creditworthiness and repayment capability play significant roles. In the event of default, the borrower remains liable until the debt is settled.

Explore Your Options

At PPS we're committed to assisting and guiding you through every step of the process.

Can you do Hard money loans on residential and commercial loans?

Yes, we can. We have investors who handle hard money loans. Every one of these types of loans are different, and we can find the best fit for your needs.