A Hard money loan is a loan secured by the equity of a real estate property. Hard money loans are typically arranged at higher interest rates than conventional commercial or residential property loans. In reality every Hard money loan is different from any other Hard money loan. There are many other factors that affect individual Hard money loans among them: Equity, ownership occupancy status, property type, property age and condition, deferred maintenance, location, co-borrowers, market trends, availability of lenders and other factors. Most of the factors above can be mitigated with one word. EQUITY!
The industry began in the late 1950s when the credit industry in the US underwent drastic changes (see FDIC: Evaluating the Consumer Revolution). Hard Money Loans or Private Money Loans are terms that are used almost exclusively in the United States and Canada where Hard Money Loans or Private Money Loans are most common. In commercial real estate, Hard Money or Private Money was developed as an alternative for property owners seeking capital against the value of their holdings. The speed and flexibility of the Hard Money or Private Money lender to provide the loan was the answer. The industry eventually spread to the residential markets.