So I hear different investors throwing around the Hardmoney and Private Lending terms so loosely. I wanted to know you all's thoughts on what the clear differences are between the two...
Hey @Rashad S. In a nutshell:
Hard money lenders are non-bank organizations that lend based upon the real estate asset itself, rather than on the creditworthiness of the borrower. Hard money loans are usually short-term (as in less than a year) and tend to carry higher interest costs than bank loans. They also typically require payment upfront of additional pre-paid interest, referred to as “finance points.” So, for example, a typical hard money loan might be structured at 15% and 5 points. So if you borrowed $100K for 6 months, you’d pay $5,000 in points at closing, then in 6 months you’d pay back the $100K plus $7,500 in interest.
Private lenders are simply individuals with funds searching for a decent return. Since many private lenders are not really “in the business” of lending, their terms, rates, and qualifications tend to be much more fluid and flexible than banks or hard money lenders.