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Pros & Cons of Hard Money?

A Hard Money Loan is also called an Asset-based loan because the underwriting (decision to make a loan or not) is primarily based on the equity or value of the property in which the loan is being made. A hard asset is the “HARD” in Hard Money). Hard Money loans almost always come from Private Lenders who are lending their own money or a group of investors money. Hard Money loans are most commonly business purpose in nature which means the loan is being made on an investment property like a home that is being rented or a commercial building. Hard Money Loans, Fix and Flip Loans, Rehab Loans, are designed for investors who are purchasing distressed real estate at a discount and need cash to close.


The goal of a hard money loan is to help real estate investors acquire a piece of property. If they plan to hold the property they will commonly go back to the bank and get a refinance at a lower interest rate after the completion of the rehab. If they want to flip the property, then the goal will be to be to buy the property at a discount, fix it up, and sell it quickly. Here are some of the pros and cons to weigh when considering a hard money loan.

Pros of Hard Money:

  • Speed to close the loan – Typically around a week.

  • Much less required documentation to get a loan

  • Less regulation allows for different qualifications to get a loan approved – The lender sets the qualification terms not the government and they can decide what makes you a good candidate to lend to.

Cons of Hard Money:

  • Expensive – Because a private lender is generally using their own money, they determine the interest rate which can vary a lot. Private Lenders will almost always require a higher rate of return (higher interest) than banks who get their money from less costly sources like depositors or the Federal Reserve.

  • Less Regulations also allows the lender to set their own terms for the repayment of the loan. Be sure to read, understand, and agree with all your lenders terms of the loan.

To discover if a hard money loan is the right option for you give our lending team at NW Alternative Mortgage a call at 503-343-7999 today!


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