Hard money
For the use of the term in politics, see hard money (politics).
Hard money policies are those which are against Fiat money and therefore usually in support of the Gold standard, or other standard based on other precious substances.
Hard money also refers to a type of commercial real estate loan product that requires real estate backing. Hard money is most commonly used as a type of bridge loan for temporary financing.
A bridge loan for real estate purchases ? a short term financing solution for any number of reasons, either to avoid a probem or take advantage of an opportunity.
?On the flip side, hard money may be used by the current owner of a property to save it from foreclosure.
?Hard money is used to finance business acquisitions/mergers.
? Business turnaround strategies may make use of hard money, as the borrower often does not meet bank financing criteria.
The examples above demonstrates the use of hard money as a bridge loan solution for commercial real estate from the completion phase of construction until the property reaches economic stability.
Hard money is an expedient option for the restructuring of debt or to avoid corporate or personal bankruptcy. When instant cash flow is required, and bank loans would take too long or the borrower does not meet bank lending criteria, hard money may be used to meet environmental protection agency mandates, taxes, fines and/or levies.
In any circumstance in which the borrower or the real estate asset does not meet bank lending criteria, whether it be current financial status or financial history, type of property, legal residential or citizenship status of the borrower, or other, hard money can often provide a swift temporary or permanent solution.
Hard Money Loan Terms and Conditions
Hard money loan terms and conditions differ from bank or mortgage loans. Due to the increased risk of working with more relaxed or flexible criteria than banks, hard money loans have shorter terms and higher rates. However, in order to make hard money loans a viable solution for borrowers, hard money lenders may structure the financing of the loan in creative ways.
Some lenders have structured hard money loans such that a portion of the interest owed was deferred and included in balloon payment at a future date. This yielded affordable monthly payments for an immediate solution and provided for payment of the additional interest in the future, giving borrowers time to arrange for long term financing and/or be reach a financial maturity in the funded projects so that the balloon payment could be made.
Here are some terms you are likely to find in hard money loans:
? Loan terms from one to three years
? Higher interest rates than found in bank or traditional mortgage financing
? Higher points, which may be required to be paid in advance
? The possibility of participation in the success of the venture, in the form of a back-end fee, deferred interest, or balloon payment
See also
- Commercial Lenders
- Bridge Loans
- Hard Money Lenders
- Mortgages
