What You Need to Know About San Diego Hard Money Lenders

by Morgan A. Scott

When one discusses San Diego real estate loans the term 'San Diego hard money' often comes up. But what is hard money exactly? Well, hard money is also known as private money and it is used when describing any loan that is made by either a private person or an entity. When it comes to real estate transactions in the California area both terms are frequently used.

The main difference between the usual types of loans and hard money is that the latter is usually based entirely upon the collateral of the property concerned. Because of this reason, you will discover that very often the loans are written way beneath what the property's value actually is. From the investor's point of view, they wish to make sure that there is sufficient equity available should there be a loss, or if the borrower defaults on their payments.

Whereas usually private investors provide the San Diego hard money loans, they can also be provided by private institutions and entities.

It is always worthwhile to determine whether private money is the right option for your needs. Determining this requires you to consider a number of different variables. First of all, before you decide to make use of private money, you should always consider conventional sources of money. Conventional sources would include national and regional banks and credit unions. When it comes to the best competitive pricing and terms for the borrower, these sources are the best solution.

If a normal bank will not finance your transaction then you may be eligible for private money options. In order to take advantage of these loans there must be equity in the transaction considered, an ability to repay and the willingness to pay 2 to 3 times the amount in interest rate and fees.

This may well cause you to question the logic of utilizing private money. But there are times and occasions when using this type of loan makes sense. Reasons for using private money would include:

You require a Bridge loan.

If you require cash in order to buy property.

You have to renovate a property to sell.

You are in a short escrow and need to purchase quickly.

For financial reasons you find that you need to access the equity in your property.

You need to extend a bridge loan.

You have many properties and a bank will not finance any more.

You have approached the banks but they have refused you finance because you have a unique property.

You are in a strong equity position and you are able to repay the loan but due to a negative credit record the banks have turned you down.

You require a temporary cash flow for your business.

When it comes to San Diego private money, as with most things in life, there are both advantages and disadvantages. Private money is usually expensive and in most cases it has shorter terms than the majority of bank loans. But, because of the speed and flexibility of these loans they are very convenient and valuable. For many borrowers with California real estate needs it can be a very practical tool that they can make use of.

Really, San Diego hard money is really not that hard. In fact the time in which it takes to complete a private money transaction is typically much faster than a traditional bank loan. The difficult part about hard money loans is the fee and terms associated. It definitely is not the best solution for everyone, but it can be a perfect solution for some.

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