Are Hard Money Loans the Same as Cash?

Investing in real estate is an undertaking that’s not for the faint of heart, especially when it comes to sorting out the funding. It’s important to understand that you have financial resources other than just traditional banking institutions, such as reputable private money lenders that can provide what is called a hard money loan. If you’ve wondered what a hard money loan is, and if the funding is the same as cash, this information should give you a clearer picture.

What Exactly Is a Hard Money Loan?

Simply put, a hard money loan is an alternative way to secure funding for purchases outside of a conventional lending source like a bank or credit union. They are usually issued by a private company or investor, and are secured by the property itself. The amount available as a hard money loan is based on the value of what is being purchased. Since the loan is secured there is usually much less bureaucracy involved in applying for one, and they are typically shorter in duration than a traditional mortgage. By contacting hard money lenders San Diego or in your area, you can learn how to obtain one of these private loans.

What Can a Hard Money Loan Help You Do?

Although hard money loans aren’t issued exclusively for real estate purchases, that’s their most common use since the loan is secured by property. These loans can be helpful to borrowers for whom time is of the essence, perhaps due to a purchase falling out of escrow or a deal needing to be finalized more quickly than a bank’s lengthy loan approval process will accommodate. If your credit is less than ideal, or you are self-employed or otherwise have difficulty proving income, private money lenders can be much easier to work with than a bank. These shorter-term loans are also perfect for purchasing structures that need extensive remodeling in order to become habitable, or for properties that will be flipped for profit.

Is Hard Money Just Like Cash?

While a hard money loan is not cash, per se, securing one can ensure you have a better chance of closing a deal than if you opt for a traditional bank loan, namely because these loans are usually approved and funded much more quickly. You’ll likely be able to proceed almost as swiftly with your purchase as you would if you were paying cash. Additionally, if you’re working with a seller who will lower the price if cash is offered, the seller may view your hard money loan as the next best thing and cut you a deal.

Obtaining a hard money loan may be the right option if you’re keen on cutting through the red tape involved in traditional lending. Private money lenders can help you move through your purchase with speed and flexibility, and in many deals their funding can give you the upper hand in the same way cash would. Reach out to a hard money lender if this sounds like the right fit for your next real estate purchase.

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