A loan of "last resort" or a short-term bridge loan. Hard money loans are backed by the value of the property, not by the credit worthiness of the borrower. Since the property itself is used as the only protection against default by the borrower, hard money loans have lower loan-to-value (LTV) ratios than traditional loans.

1. Renovo Financial

2. What is a Hard Money Loan?
A loan of "last resort" or a short-term bridge loan.
Hard money loans are backed by the value of the
property, not by the credit worthiness of the
borrower. Since the property itself is used as the only
protection against default by the borrower, hard
money loans have lower loan-to-value (LTV) ratios
than traditional loans.
Definition of 'Hard Money Loan'

3. Loan structure
A hard money loan is a species of real estate loan collateralized against the quick-sale value
of the property for which the loan is made. Most lenders fund in the first lien position,
meaning that in the event of a default, they are the first creditor to receive remuneration.
Occasionally, a lender will subordinate to another first lien position loan; this loan is known
as a mezzanine loan, a second lien or a junior lien.
Hard money lenders structure loans based on a percentage of the quick-sale value of the
subject property. This is called the loan-to-value or LTV ratio and typically hovers between
60 and 70% of the market value of the property. For the purpose of determining an LTV,
the word "value" is defined as "today's purchase price." This is the amount a lender could
reasonably expect to realize from the sale of the property in the event that the loan
defaults and the property must be sold in a one- to four-month timeframe. This value
differs from a market value appraisal, which assumes an arms-length transaction in which
neither buyer nor seller is acting under duress.
Below is an example of how a commercial real estate purchase might be structured by a
hard money lender:
65% Hard money (Conforming loan)
20% Borrower equity (cash or additional collateralized real estate)
15% Seller carryback loan or other subordinated (mezzanine) loan

4. Commercial hard money
Commercial hard money is similar to traditional hard money, but may sometimes be more
expensive as the risk is higher on investment property or non-owner occupied properties.
Commercial Hard Money Loans may not be subject to the same consumer loan safeguards as
a residential mortgage may be in the state the mortgage is issued. Commercial hard money
loans are often short term and therefore interchangeably referred to as bridge loans or
bridge financing.

5. Legal and regulatory issues
From inception, the hard money field has always been formally unregulated by state or
federal laws, although some restrictions on interest rates (usury laws) by state governments
restrict the rates of hard money such that operations in several states, including Tennessee
and Arkansas are virtually untenable for lending firms.
Interest rate on hard money
The rate is not dependent on the Bank Rate. It is instead more dependent on the real estate
market and availability of hard money credit. As of 2008 and for the past decade hard
money has ranged from the mid 12%–21% range . When a borrower defaults they may be
charged a higher "Default Rate". That rate can be as high as allowed by law, which may go
up to or around 25%–29%. Some private lenders will collect a prepayment penalty and
some will not.

6. Contact Us
Address
Renovo Financial, LLC
1016 W. Jackson Blvd., Suite 316 Chicago ,
IL60607 USA
Phone : 312.243.3288
Fax : 773-442-0600
E-mail : drosen@renovofinancial.com
www.renovofinancial.com