Hard money loan

A hard money loan is funded by private investors or specialty lenders and is backed primarily by the value of real estate rather than by the borrower's financial profile. Because the property secures the loan, lenders can approve quickly and look mainly at the asset and the deal, which makes hard money popular with real estate investors, house flippers, and developers who need to move fast. Terms are short, often six months to a few years, and rates and fees run well above bank loans to compensate the lender for the speed and risk. Lenders typically advance a percentage of the property value rather than the full amount.

This fits time sensitive real estate deals where conventional financing is too slow or unavailable, such as buying a distressed property to renovate and resell. The speed and asset focus are the appeal, but the high cost and short term mean it works only when you have a clear, quick exit, usually a sale or a refinance into cheaper financing. Approval and pricing hinge on the property value, the loan to value ratio, and your exit plan. Going in without a realistic payoff strategy can be expensive.