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What are Hard-Money Loans and Private-Party Mortgage Lenders?
These terms are often used interchangeably (i.e., hard money lenders, private party loans, etc.). But no matter which term is used, they all relate to the same thing: getting a mortgage loan from a lender that is not a licensed financial institution.
Although such loans can be used for mortgages, they are actually classified as personal loans.
More often than not, personal mortgage loans are taken by borrowers that have credit issues such as low credit scores, low income, and bankruptcy.
- advantages: Although other options exist (for example, a shared-appreciation loan), this is one way for a borrower to get a home with the assistance of a family member or friend that are willing to finance a home. In this regard, there is often no need for closing costs.
- disadvantages: Since such loans are often the only available to borrowers that can't qualify for a conventional loan or even one from a government-sponsored entity, the risks can be very high for both the borrower and the lender.
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