Hard Money

Hard money is at the center of everything Source Capital does. This financing solution provides fast funding to borrowers who may not qualify for traditional loans. Read on to learn all about hard money and whether this loan type may meet your needs.

Hard money is a type of financing that is secured by real estate. These loan types serve as an alternative to traditional loans. Their differences include:

• Funding: Hard money loans are typically funded by private lenders, rather than banks or financial institutions. 
• Flexibility: Because of their private funding, hard money loans tend to be much more flexible than a traditional loan. 
• Speed: Funding for traditional loans can take months, whereas hard money funding can be available in as little as a week. 
• Terms: Hard money loans have shorter terms, typically between 12 and 24 months. 
• Eligibility requirements: While traditional loans look to creditworthiness and financial history to qualify, hard money primarily looks to the collateral property and places little significance on the borrower’s finances.

Your hard money loan exit strategy plays a key role in your loan application. A strong and feasible exit strategy may make the difference between a loan approval or rejection. It can also result in better loan terms or a higher loan amount. 

Hard money allows borrowers to quickly access funding based on their assets, rather than their finances. It’s a valuable solution for real estate investors, house flippers, and other property owners who need rapid access to funding, but may be considered too “risky” to qualify for traditional loans.

Interested in hard money? Let’s break down Source Capital’s hard money loan process:

Review real-world hard money scenarios to see these loan types in action.

A homeowner wants to upgrade from their current two-bedroom apartment to a single-family home. When their ideal property hits the market, they haven’t yet sold their apartment and are short on funds. Not wanting to miss the opportunity, they explore hard money loans.

They secure a hard money bridge loan using their apartment as collateral. This allows them to purchase the new home quickly without waiting for the sale of their existing property. Within the next 12 months, they successfully sell the apartment and use the proceeds to repay the hard money loan in full.

A real estate investor wants to buy a property, renovate it, and resell it for a profit, but lacks the funding for both the purchase and renovation. They approach a hard money lender who offers a residential hard money loan secured by another property the investor owns. 

The loan covers both the acquisition cost and renovation budget. The investor renovates the property and sells it at a profit. A portion of the sales proceeds is then used to pay off the hard money loan.