Hard money loans are commonly obtained for short-term needs to refinance or purchase real estate when banks will not approve the borrowers. The length of the hard money loan is typically written for between 6 months and three years; however, sometimes, situations call for longer terms and some private lenders will write the term for as long as 7 years. In contrast, traditional mortgages are written for between 10 and 30-year terms.
Many times, hard money loans are written for 3 years or less. As private money is pricier than conventional lending, many borrowers are using these funds for interim financing until the property is sale ready or the borrowers’ income and credit suggest that they can refinance at an institution for a more reasonable rate.
Most investors understand that private financing is a short-term fix for borrowers. Therefore, the term is written for a shorter period. Additionally, these loans are riskier in nature and the lenders do not want to stay with riskier loans longer than necessary. Most investors will grant short term extensions to borrowers so long as the borrowers have been responsible with their payments, current with their taxes and insurance, and the property has not seen a significant drop in value.
While the length of the loan is a negotiable item, most lenders are careful to weigh the risk factors – loan to value, neighborhood trends, macroeconomic trends, borrowers’ credit, exit strategy- to determine if the loan should be written for a longer or shorter term.
At Cushner Capital Group, we understand that the length of term is critical for the borrower and lender to achieve their goals. When it comes to private hard money financing of California properties, we will do everything possible to find a realistic term that will bring a positive result for the borrower and the lender. Call us at Cushner Capital Group – 760 845-9035.
