Hard Money Lending vs. Soft Money Lending in Bakersfield, CA

Many people get confused about “hard money vs. soft money.” Some think that hard money simply means cash on hand while soft money is cash on paper, which isn’t exactly the case. Depending on which context you apply the terms, there would also be various definitions.

Hard money describes physical currency like coins in a basic economic context, while soft money refers to paper currency. In the financial arena, a hard money loan and a soft money loan are both asset-based financing, with the former being harder to acquire than the latter. 

Depending on your specific goals and requirements, either of the two types can be the right one for you. As an investor who looks at long-term investing, soft money loans are ideal. A hard money loan would be the best option for those who choose short-term investments and can pay high interest.

If you need help finding out which one is best, you can get in touch with a hard money lender in Bakersfield.

What is a hard money loan?

A hard money loan is a type of loan backed by a “hard” asset such as real estate. This is an ideal type of loan product for real estate investors or house flippers who need financing to close investment deals.

Hard money loans are designed for short-term financing and are always secured by an asset. 

This type of loan is popular among flippers and real estate investors since it provides a faster and easier way to finance an investment than the traditional way financial institutions require.

Since this type of loan is asset-based, even if a buyer has weak creditworthiness, approval can still happen.

When in the market for a hard money lender, make sure that you find a reputable company with a proven track record in the business.

If you want to know more, you can contact a Bakersfield mortgage broker and ask about hard money loan products.

What is a soft money loan?

A soft money loan is also an asset-based form of a loan but is easier to acquire than hard money loans.

A soft money loan gives buyers a new approach to private money lending where you can have the best of both hard money loans and traditional loans.

You’ll experience more underwriting with soft money than hard money loans, resulting in lower interest rates and greater security. 

This type of loan is a good option for first-time real estate investors who are looking to build their credit scores while looking for lower rates.

Soft money loan lenders tend to look more at a borrower’s credit scores which is where the elements of a hard money loan and a conventional loan can be noticed.

Soft money loans have no national or state governing standards over them compared to hard money loans with strict restrictions employed by the State.

What are the similarities between a hard money loan and a soft money loan?

These terms are used in different contexts, and in the real estate arena, hard money loans are some type of asset-based debt secured by real estate. Soft money loans are almost the same, except they are based on a buyer’s creditworthiness compared to hard money loans.

Here are the similarities between a hard money loan and a soft money loan:

• Hard money and soft money loans are similar in purpose as they are used to purchase or renovate real estate, particularly investment properties.

• They also require collateral and down payment.

• Lenders who provide these loan products investigate your credit history and use it as a basis for approval or denial.

• Both loans require monthly interest payments over the term of the loan, with hard money loans often requiring interest only.

If a hard money loan interests you, why not apply for a hard money loan by Accelerated Lending Group.

When to use hard money vs. soft money loan?

A hard money loan is a good option for those who are planning to buy a distressed property that needs renovation. Fix and flip project investors are the most typical clients of hard money lenders. In this scenario, investors are in and out of the project in 12 months or less.

A soft money loan is ideal for long-term investment projects where an investor buys a property, rehabs it, and rents it out for a long period.

What are the differences between a hard money loan and a soft money loan?

Here are the differences between soft money and hard money loans:

• You can source soft money loans from banks and private lenders, while hard money loans are provided by private lenders only.

• Soft money is a long-term loan, while hard money is a short-term loan.

• You can use a soft money loan for properties in good condition only, while hard money loans allow you to buy properties that need repairs.

• Soft money loans can take 60 to 90 days to close, while hard money loans can be closed in as fast as 5 days.

• Soft money loans have lower interest rates than hard money loans

• Soft money loans have no owner-occupancy requirements, while hard money loans sometimes require this.

• There’s more paperwork with soft money loans compared to hard money loans.

If you are an investor interested in Bakersfield real estate, you can ask a broker if a hard money loan would work in your situation.

Need help with your hard money loan application?

If you feel you have a better chance at hard money lending than getting approval for a conventional loan, we would gladly assist you in the loan application process.

Our hard money lending experts at Accelerated Lending Group of Bakersfield, CA, can ensure that you’ll get the best deal in town.

 

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.