Hard Money Loans

Borrow Money Based on Current Value of a Commercial Property

Hard money loans pertain to a certain kind of financing where a borrower receives funds based on the value of a commercial real estate parcel. These loans usually come with a much higher interest rate than a conventional commercial or residential mortgage loan. They are rarely issued by a commercial bank.

Hard money loan basics

Hard money loans are usually obtained by property owners seeking capital against the value of their asset.

These loans are based on the quick sale value of the real estate in question. Lenders typically structure hard money loans based on a percentage of this quick sale value. This is commonly referred to as the LTV (loan-to-value) ratio. The LTV often falls somewhere between 60 and 70 percent of the property's value. The "value" part of the LTV is dtermined by the price that the property could be expected to sell in short time should the loan default.

This is one example of how a hard money loan might be structured by a lender:

60% hard money loan

20% borrower contribution such as cash or other collateral

25% additional loan(s)

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Frequently Asked Question

Will refinancing enable me to terminate my PMI?

Answer:
You may be able to eliminate PMI by refinancing. If, by refinancing, you are able to have at least 20% equity in your home, and you have made your house payments on time for the last year or so.

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