Hard Money Land Loans

Hard money land loans are available from hard money lenders if the borrower cannot get financing from anyone else. The disadvantage of hard money land loans is that they are costly; they are much more expensive than a bank loan, for example. The advantage is they may be available as a last resort when no one else is willing to take a risk on the loan applicant.

The difference between hard money financing and traditional bank financing is in the details. Hard money land loans will have a much higher interest rate. They may charge more upfront points. And they may require a large balloon payment.

Who Gets Hard Money Land Loans?

Typically, hard money loans are for people with bad credit, no credit, an impending foreclosure, or some other red flag that causes banks and other lending institutions to balk. Rather than take a risk on them, banks usually decline their applications. Hard money lenders, on the other hand, are more open to them, especially if they have equity in a home or property.

Also, real estate investors borrow hard money from private (or hard money) lenders on a short-term basis to purchase or upgrade properties. Again, banks are reluctant to loan money for certain types of non-traditional investments, and these lenders fill this niche. Since hard money loans are typically for high-risk people, the rates and fees are substantially higher than regular bank loans.