Hard Money Loans
Hard money loans are a specific type of asset-based loan financing in which a borrower receives funds secured by the value of a parcel of real estate. Hard money loans are typically issued at much higher interest rates than conventional commercial or residential property loans and are almost never issued by a commercial bank or other deposit institution. A Hard money loan is similar to a bridge loan which usually has similar criteria for lending as well as cost to the borrowers. The primary difference is that a bridge loan often refers to a commercial property or investment property that may be in transition and does not yet qualify for traditional financing, whereas hard money loans often refer to not only an asset-based loan with a high interest rate, but possibly a distressed financial situation, such as arrears on the existing mortgage, or where bankruptcy and foreclosure proceedings are occurring.
Many hard money loans are made by private investors, generally in their local areas. Usually the credit score of the borrower is not important, as the loan is secured by the value of the collateral property. Typically, the maximum hard money loan to value ratio is 65-70%. That is, if the property is worth $100,000, the lender would advance $65,000-70,000 against it. This low LTV provides added security for the lender, in case the borrower does not pay and they have to foreclose on the property. Clear Mortgage is a private lender.
Our specialty is hard money loans on single family, residential properties in Arizona and Utah. We have underwritten and funded thousands of this type of loan. We have never really liked the term hard money loans because it sounds harsh. The reality is there is a time and a place. We can fund very quickly. We are relying on the asset to back our investment. We do not require financials, bank statements, or tax returns. We do our own in house analysis of the property so we do not require an outside appraisal. We know the Arizona and Utah markets very well. We want to be helpful. Our hope is that our clients are successful. We would like for our clients to think of us as a cheap partner, an asset, a resource, fuel for their success.