Hard Money Lending Explained
Fast Financing for Real Estate Investors
What is Hard Money Lending?
Hard money loans, also known as private or bridge loans, offer short-term financing (1-5 years) for real estate investments. These loans typically have lower loan-to-value ratios (LTV) compared to banks, but with higher interest rates and fees. Investors use them to capitalize on opportunities that traditional lenders might miss.
How is it Different from a Bank Loan?
Unlike banks that focus on your credit score and ability to repay, hard money lenders prioritize the property's value and your exit strategy (how you plan to repay the loan). Our primary concern is ensuring the loan is secured by the property's equity.
Speed and Flexibility: Our approvals are faster and more flexible than traditional lenders. This is ideal if you have a time-sensitive deal that doesn't fit the rigid criteria of a bank.
Focus on Equity, Not Credit: Say goodbye to being denied because of a less-than-perfect credit score. We focus on the property's potential to repay the loan.
Exit Strategy Matters: Since our loans are short-term, having a clear plan to sell or refinance the property within a year is crucial.
Higher Costs, Greater Rewards: Hard money loans may have higher costs than traditional loans, but they can unlock profitable deals that banks might reject. Imagine securing a property with the potential for a significant return, even if it comes with a higher financing cost upfront.
Loan-to-Value Ratio (LTV): Hard money loans typically offer a lower LTV than banks. Mojave Capital offers loans up to 75% of the property's After Repair Value (ARV).
Who Funds These Loans?
Our loans are funded by private investors seeking returns on residential mortgages. Typically, each loan is funded by a single investor.
Cash at Closing?
While cash at closing is generally not required for a great deal, keep in mind that truly exceptional deals are rare. You'll likely need a contract for under 75% of market value to avoid needing cash upfront.