Most Common Types of Hard Money Loans Available Today

Real estate investing is a great way to make money and to secure your financial future. Many first time investors are probably curious about hard money loans. When someone speaks about hard money loans, the most important thing to remember is that hard money loans come from individuals and not typically from traditional lending institutions. So for many hard money lenders, protecting their capital investment is a first priority.

Hard money loans are great for beginning investors who may not have the total amount needed to purchase their property. Using a hard money lender can also be a creative way to finance a property. Here is a break down on the most common types of hard money loans available today:

1. Rehab or Renovation Loan: A rehab loan is a loan that allows the buyer to purchase the real estate property and to also make the necessary renovations it may need. This type of loan allows the buyer to get a loan for more than the current value.

2. Bridge Loan: This is a short-term loan that is used until the investor/buyer is able to get more permanent financing. This type of loan offers immediate cash flow. They are also backed by some form of collateral such as real estate.

3. Spec Construction Loan: Spec is short for speculation. Many contractors, builders and developers will build homes without the guarantee of sale and are said to be building on “spec”. Spec homes are constructed and purchased on a speculation basis.

Before securing a hard money loan, there are a few things to need to keep in mind. For one, you need to make sure that you have some sort of down payment available. The hard money lender will want to see that you are able to invest some portion of money into the property. You should also understand the terms and conditions of the loan itself. Finally, make sure that your budget reflects the true costs of buying the property and all renovation costs, including contingency money.