Hard Money Loan Definition

A hard money loan is a type of loan financing in which the borrower receives cash secured against real estate. Hard money loans are usually issued at very high interest rates and are issued at only about 2/3 or less of the secured real estate’s quick-sale value. Most hard money loans are made by private investors within a very limited geographic area, and the cash received is typically used to salvage a difficult financial situation-e.g., to avoid pending foreclosure by paying off mortgage arrears. Most hard money loans are made only in the first lien position, meaning that should the property be foreclosed, the hard money loan is the first loan secured.