Hard Money Loans

What is ‘Hard Money’?

When you hear the words “hard money,” you probably have no clue as to what it might mean. After all, you are probably just as familiar with hard money as you are with bank loans. Truth be told, most people have no idea about the commonly used terms used by loan companies.

Simply put, hard money mortgages are privately funded real estate secured loans. This kind of loan is also known as a private money loan. In most cases, these loans cost, percentage-wise, much more than a mortgage. In some cases, this amount can be up to double what the regular mortgage costs, and higher origination fees. On the other hand, hard money mortgages come with their own set of benefits. Continue reading below to learn everything you need to know about private money loans and how you can obtain one.

What Are Hard Money Lenders?

Hard money lenders are private individuals or small groups that lend money. Hard money lenders base the loans they offer on the property rather than credit scores.

What is a Hard Money Loan?

We view our Colorado private money loans as investments to borrowers who need the money for a time-sensitive opportunity, as opposed to bank loans, which can take months to be approved. A hard money loan is a private money loan secured by hard assets, or collateral, with secondary consideration given to lending other 3 “C’s” – character, capacity, and cash flow. Collateral for private financing in Colorado may run the spectrum from raw land on the eastern plains to resort property at treeline in our beautiful Colorado high country. Other collateral will also be a factor some of the time, depending on the circumstances.

Private money loans are often the quickest, surest way to have the funds to acquire property when traditional underwriting takes too long. Unusual and hard to finance properties will usually require private financing. Once the property has undergone a fix and flip, a more traditional loan can replace the house flipping loan.

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Who Needs A Private Money Loan?

Investors who seek private financing all have different investment types and expertise. Much of the market for Private Hard Money Loans are developers and house-flippers. Conversely, some people try to use it to fund deals by borrowing up to 100 percent of their purchase price. In cases like this, however, a Colorado hard money lender may require that you back up your loan with other assets, as we do at Abbey Mortgage. If you can buy a property and turn it around fairly quickly for a big profit, but cannot get a standard commercial or residential mortgage, you may want to think about using a private hard money lender to help you with your endeavors. In some cases, an investor will choose to use the hard loan to get into the property to make some quick adjustments to raise the overall value of the property, and then they will get a new loan from a bank. This loan will be based on the property’s new and improved value and pay off the money loaned to them by a private hard money lender.

What are the Benefits of a Hard Money Lender?

Let’s also consider some of the benefits of using a private lender. Private hard money mortgage amounts are generally relational to a property’s value rather than the acquisition cost. They can be obtained quickly with flexible or even customized terms — flexible collateral coverage on your Colorado property or properties.

We can help when you need some breathing room on a project or investment. Private lenders like Abbey Mortgage can fulfill loans when bankers may have said, “no.” Although some lenders do not want short-term loans on their books, that is precisely the type of investment we want to loan money. We typically allow early prepayment — especially if you ask for this consideration upfront. When the opportunity is as enormous as a Colorado fourteener, these loans may cost more than a bank loan. Still, you can get right on with the development, turnaround, or construction work, without risking the deal by risking the financing with a traditional lending source. Hard money lenders are a great source of bridge mortgages, turnarounds, construction, rehabilitation, or “fix and flips.”

In short, a private lender loan can make your deal happen. When you need to make that Colorado investment work out for the better, sophisticated investors will often use asset-based financing, another term for private money loans, on their Colorado projects. When opportunity knocks, you need to act fast as they will not linger.

Property Types For Private Money Loans

Investors require private financing for various property investments from single-family residential, multi-family residential, commercial property, land, commercial and industrial spaces. Abbey Mortgage and Investments specializes in Real Estate Investment Financing because we know this professional realm like the back of our hands. We are familiar with what kind of borrowers are worth investing in, and we can offer plenty of guidance when it comes to navigating the waters of commercial mortgage loans.

What Types of Deals Are Private Lender’s Loans Used?

As we mentioned previously, hard money loans are not right for every deal. When you are purchasing a residence with good credit, income history, and there are no issues with foreclosure or the sale in general, you will likely want to use a bank for conventional financing. Private money loans exist as a source of funding when banks are not an option for you, or the loan is for a short amount of time.

The ideal situations for using private financing is fix and flip homes, land loans, construction loans when a sale deal with a buyer with credit problems, and when a real estate investor needs to act quickly to obtain a property.

Why Should You Use A Private Money Loan?

Again, there are many different types of people who seek out private money loans, and they all use them for various reasons. The main reason you should consider using a private hard money lender is if you need to obtain the loan in a short period. It is more common than not that a hard money loan can fund the borrower within a week of when the money is needed. This quick action is much different from using a bank loan, which can take anywhere from 30 to 45 days.

When it comes to the application process for a private money loan, the entire thing will only take a day or two. In individual cases, we may even approve a mortgage on the same day of the application. Again, this is never something that could happen if you were to seek funding from a bank.

Because funding can happen at a faster rate, private money loans offer a significant advantage to borrowers.

It is especially true for real estate investors who are trying to acquire a property that has many competing bids. Getting a seller’s attention is much easier for the investor when there is potential to have a quick close because private money is on the table.

A borrower may also have to opt to get a loan in the case that one or more banks rejected them for a conventional loan. People often experience short sales, foreclosures, credit issues, and more that get in their way of achieving what they are working. Hard money lending can help in cases like this, and private hard money lenders will look past issues like this and can provide funding so long as they know the borrower will repay the loan, and that the borrower also has enough equity.

Borrower Requirements

Since the primary concern of the private hard money lender is equity or collateral, after all, Abbey Mortgage and Investments underwriting is far less worried about the investor’s credit score. Even if there are issues, even foreclosures or short sales, we are likely to look beyond them, provided they have enough capital to pay the interest on the loan. It is also possible that the lender will take the borrower’s plans and timeline into consideration. If the presented project is not reasonable and doesn’t explain how they plan on paying off the loan, the chance that the Colorado hard money lender will still be interested in loaning the money is slim to none

Finding a Hard Money Lender to Work With

When you are in the market for a hard money lender, it can often be complex to find one who isn’t more interested in the property versus your success. Abbey Mortgage has been serving Colorado investors since 1994, and we have an outstanding record of helping investors meet their investing goals.

However, when you are searching, one of the best ways to locate a reputable Colorado hard money lender is to ask around. Find out where other people have obtained their loans and their experience. You could also choose to attend your local real estate investor club meeting for some idea of who the good and bad names are in the private lending loan business. It’s a smart idea as it will allow you to network with other potential borrowers, hear their stories, and learn from their mistakes.

On the other hand, you could take our word for it. Robert Kearney at Abbey Mortgage & Investments is the best of the best in Colorado when you are looking to obtain private real estate investmentfinancing.

Why Choose Robert Kearney for Your Private Money Loan needs?

Robert Kearney at Abbey Mortgage & Investments has a wide range of experience in the real estate world and the world of lending. This real-life knowledge makes him a valuable member of your hard money financing team, one you shouldn’t miss out on leveraging. With extensive experience in Construction Management, Development, property zoning and rezoning, lending, workouts, property investment, property management, and much more, this hard money lender has seen complex financings from every angle. What this means is that he will know the mistakes you should avoid before you ever even consider making them. He will work with you closely to ensure that your lending process is virtually seamless.

This enormously insightful and creative perspective can make the difference for your investment. These insights and expertise mean that for your loan needs in Colorado, you need his valuable insight to help your project succeed.

Call Abbey Mortgage & Investments, Inc. at 970-532-4243 now or fill out this form for a FREE Hard Money Loan evaluation.

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