Hard Money Loans – Lenders and Brokers

A hard money loan funds a potentially viable project for which financing may be unavailable from conventional sources. As you might imagine, the risks involved are greater, and so are the interest rates.

Hard money loans can be used for a wide variety of purposes -- bridge financing, debt consolidation, acquiring property, commercial deals and many other purposes. Lending decisions and loan disbursement are normally quick, and collateral is required.

Normally, the practice is to advance around 65% of the value of the security offered. The standard practice of Kennedy Funding, the nation’s largest direct private lender of hard money and bridge loans, is somewhat different. Kennedy Funding will normally fund up to 75% LTV. In some cases, Kennedy will grant higher amounts. And typically, applications for amounts in a certain range, usually $1 million to $100 million, are considered. In some special cases, Kennedy Funding will fund loan amounts above $100 million.

Some lenders won’t advance money on the collateral of properties on which the borrower or his close relatives are living. Lenders often consider bad credit and high-risk applicants who may find it difficult to borrow elsewhere.

In the hard money field, the major players are lenders and brokers. As a borrower, you can approach either group. A broker’s job is to put the potential client in touch with interested lenders, and offer advice on the best deals. Quotes from three or four possible lenders are typically presented to the borrower.

Of course, there is likely to be a fee for the services. If the lender is approached directly, there would be some savings, but most borrowers may not know whom to approach, or how to deal effectively if they do.

You may or may not have to offer a payment up front, as some lenders will process a loan application without an advance. The annual interest amount is divided by twelve to arrive at the monthly installment.

When all is said and done, hard money funding caters to a real need. Kennedy Funding ranks at the top of the hard money funding assemblage.

Understanding Hard Money Loans

Hard money loans are often described in complex real estate terminology which makes it difficult to understand. This is unfortunate, because the hard money loan is actually a very simple concept. In actuality, it’s the provision of an actual cash loan made to a borrower by a private lender. In a typical Kennedy Funding scenario, hard money loans are not subject to the stringent guidelines of a federal or conglomerate lending institution, and are therefore negotiable with Kennedy Funding directly, which offers avenues of negotiation not available elsewhere.

Who applies for hard money loans

The hard money loan, in theory, is a private loan that doesn’t require the same stringent guidelines as other loan types. Because of this simple reason, the hard money loan is frequently sought by people who:

* Have a history of bad credit
* Have no credit
* Have previously had a property foreclosure
* Have unverifiable income
* Must refinance immediately
* Need hard money quickly

The bottom line

Another way of thinking about the hard money loan is to view it as the pawn shop equivalent for real estate. There is no hiding the fact that the hard money loan is available with few questions asked and is paid in cash. In simple terms the cash can be used, as intended, for the financing of the project, or it can be used by the borrower in some other fashion. In any event, one can safely assume that the hard money loan will still need to be repaid and the property is still at stake.

Hard money has a definite place in today’s arena, however. Kennedy Funding, the leader in the direct private lending industry, fills a real need. Kennedy Funding does this by closing loans quicker than anyone else, and being more flexible than traditional lenders. Kennedy, in fact, has become known as a lender capable of funding those ‘impossible’ loans that no one else wants to touch.

Hard Money Mortgages for Purchasing or Refinancing

Today’s hard money comes in lots of flavors, one of the most common being mortgages. Using the owner’s equity in real estate, hard money lenders normally lend up to 75% of the value of the property. Typically, hard money mortgages are used for commercial purposes, but they cal also be used for residential properties. In this case, the loans are usually referred to by their more genteel appellation: non-conforming mortgages.

The lending criteria for hard money mortgages are pretty straightforward. Loans are based on the value of the ‘subject property’, real estate owned or about to be purchased by the borrower. If the borrower is buying property, the ‘value’ of the real estate is defined as the actual purchase price of the property. If the borrower needs hard money for a refinance, the ‘value’ is determined by a written real estate appraisal.

When looking for a hard money refinance loan, the lender will want to know certain things: when you purchased the property, what you paid for it, etc. If you bought a property a month ago for a specific sum, the lender will be hesitant to lend you more than the purchase price. When you’ve owned the property for about a year, and if you’ve put some money, sweat equity, or both into the property, then you can get a re-appraisal, and possibly get a loan based on the new, ‘improved’ value of the property. This is known as ‘seasoning.’ Make sure you’ve seasoned your property before looking for a refinance mortgage at a substantially higher value figure than what you paid for it.

Enhance Your Real Estate Equity And Investment Portfolio

Investing in real estate is one of the most common ways hard money funds are utilized. It makes sense, considering that real estate investing is a cash intensive activity. Oftentimes, investors need more operating capital than conventional lending institutions are willing to supply, especially on short notice.

Hard money can indeed be a deal saver when conventional financing takes longer than expected, or isn’t available for some reason. It’s a fact that your FICO score can take a nosedive if you invest in a lot of property, simply because of the number of mortgages you’ve taken on. On the other hand, property that is available for a reasonable price may not meet conventional banking standards. Whatever the case may be, hard money lenders are not constrained like banks or other mainstream institutions are.


Hard money lenders have to be nimble, flexible, and creative. Conventional lenders can take up to six months to fund mortgages for real estate investing, whereas hard money lenders can fund in two weeks or less from the time you begin.


Hard money lenders also have an advantage, in that they can fund projects that banks cannot. If you’re interested in investing in a golf course, airport, or amusement park, conventional banks probably won’t help you. Hard money lenders can, and will.

Hard money is best used as a bridge loan. Terms usually range from one to three years, providing ample time to prepare the property or your personal financial status to get long-term conventional financing, or to sell the property outright.

Hard Money: Should You Work With A Broker Or A Direct Lender?

You’ve decided you need a hard money loan. Should you approach a direct lender or use the help of a broker? Here are some points to consider about both options.

The Direct Lender Approach
It’s obvious what the advantages are in working directly with a direct private lender. You save money by eliminating the middleman. Brokers are paid from a percentage of the points you pay on a hard money loan. Ergo, the more brokers involved, the more you will pay in points and percentage to cover the cost.

If your hard money lender is a good match for you, you can speak directly to the right people and avoid any noisome runarounds. And be aware that, more often than we would wish, a broker’s choice of your direct lender will be based on the commission he plans to get, rather than on your best interests. By working directly, you can close more quickly, because no one can explain your situation better than you can, and obviously no one is as committed to your business and your loan as yourself.

The Broker Approach
There are also definite advantages to working with a broker. An honest, experienced broker has knowledge of and access to the top direct hard money lenders in the country, and knows where you loan will fit the best.
He can help you ‘package’ your loan in the best possible way, sharing information with you that can help decide how much to expect based on the equity in your property, how fast you need to close, and more. A top-notch broker can also help you with the complex application process and float it to what he feels are the best direct lenders for your situation.

Ultimately, you’ll have to decide: broker or direct access to a private lender. There are advantages to both.

Using Hard Money to Stop Foreclosures

You can use hard money loans in order to stop a foreclosure. These loans are the specialty that hard money and direct private lenders excel in. Should you face foreclosure on a property, whether it be one that you own or one that you wish to purchase before it hits or is already in foreclosure, hard money lenders can be a viable resource for sufficient cash in a short amount of time.


Direct private lenders can fund a real estate purchase or refinance a loan in two weeks or less from the time all your documentation is in their hands. Make sure all your documentation is ready for your broker or lender before proceeding, and use the following list as a guide.


Make sure you have:

Written real estate appraisal with photos

• Purchase contract if you are purchasing the property
• Personal financial statement
• Income statement for the borrower
• 2 yrs P&L for the property if it is income producing
• 2 yrs Tax returns for the borrower
• Statement of use of funds
• Proof of where the balance of funding will come from (such as a bank statement showing the funds available) if you are buying the property

Remember: If you’re completely prepared, with a complete package, your funding will proceed even more quickly.

Fast Money The Easy Way

When a sudden, urgent need for money pops up, you may be tempted to sell your ideal property to deal with it. It’s a good decision to get money from your own sources instead of getting bound with debts and repayments for years. But the sale process is a long one, and your needs may not wait that long, in which case a short-term bridge loan may just be the way to go. Bridge loans act as the financial bridge between the requirements of the borrower and the sale proceeds of his property.

With a short-term bridge loan, you can go for amounts ranging anywhere from $1 million up to $100 million or more, depending on the requirements and policies of the lender. These short-term loans carry a higher rate of interest, however. But, lest you trouble yourself about how you can swing such a rate, don’t worry yourself unduly. These loans give you an option to pay only the interest until you get the sale money, out of which you can pay the principle amount for the loan. The repayment period for such loans can go up to three years or more, but it’s always better to repay the loan as early as possible.

There are a lot of bridge loan lenders offering you money at different rates and terms. You need to find that one lender which can serve you best, one that will work with you on a personal, ‘custom-made’ level. One place to go for that one ‘perfect’ lender is the Internet, where large numbers of quotes are available for you to compare easily, using online comparison tools, debt and repayment calculators. But be alert for frauds and ‘sharks’, and always opt for the established, trusted, genuine lenders.

Short-term bridge loans accept the following properties as collateral for the loan:

•Residential Properties
•Commercial & Semi-Commercial Properties
•Auction Properties
•Development Sites
•Buy to Let Properties
•Retail Shops
•Land with planning permission

Bridge loans are popular among borrowers because of their faster approval for larger amounts. It can take less than five days to get your money, and these loans can be used for virtually any purpose, including buying commercial or residential properties, overseas property, traveling, debt consolidation, or any other large, personal usage. All these features make short-term bridge loans suitable for a large percentage of borrowers.