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The Basics of California Hard Money Loans

California hard money loans are a popular source of funds for borrowers that cannot get the money they need from traditional banks. Or sometimes, they can get bank financing, but they just don’t want to go through the hassles of the loan process. There are many reasons a borrower would choose hard money funding (sometimes called private funding) that we’ll discuss below. Read on to discover the basics of this type of alternative financing to see if it’s the solution you’ve been looking for.

California Hard Money Loans

What is a Hard Money Loan?

Hard money loans are a source of funds for borrowers with equity in a property when they can’t get a loan elsewhere. Or they have money to put down on a property and can’t or don’t want traditional funding. Private investors fund these loans, and each investor has their criteria.

How Do Hard Money Loans Work in California?

Instead of lending based on the borrower’s credit, assets, and income – hard money loans lend on the value of the property and the equity position. If there are no other liens on the property, – the hard money loan would be in the first position. If there’s a first mortgage, the hard money loan would be in the second position. And if there’s a first and second – the hard money loan would be in the third position. In that case, there is more risk, so the interest would most likely be higher.

In California, where property values are higher than the national average, an owner could have quite a bit of equity in their property. The owner can tap into that equity to fill their needs. Here are some of the more common things funds are spent on:

• Bridge Loan
• Cash for investment
• Buying out a co-owner
• Fixing up a property to sell
Fixing up a property to rent
• Using the funds for business purposes

Do you put a lien on the property?

Yes, we put a lien on the property just like any other lender. That protects our interest in the property. If the borrower defaults on the loan, we can foreclose.

About Hard Money Rates and Terms

Are hard money interest rates higher?

Yes, they are because there’s more risk. Don’t expect to get low 30-year rates. But it might not matter if you’re not going to have the loan for long. Your interest rate will depend on several things, including how much the property is worth, how much equity you have, our lien position, and how long you need the money.

Is a hard money loan a good loan?

Yes, if it’s the only loan you’re able to get. If you need a loan and have been turned down at every bank, credit union, broker – yes, a hard money loan is good. It’s important that we don’t try to sugar coat this loan. It won’t be the best interest and fees are higher. But private investors are putting up their own money, and the risk is much higher – hence the higher interest rate. Also, the private investors are not usually asking for tax returns, paystubs, or W-2’s.  Credit is looked at but not a large consideration. We have funded loans with credit below 500.

How long do hard money loans last?

Private loans usually last one to five years or longer. Our loans are a minimum of 1 year. We will go over all the terms of the loan prior to pulling credit. Most of these loans have a 6 month payment guarantee for the private investor.

Best Hard Money Properties

What type of properties do you finance?

Our private lenders lend on single-family homes, townhomes, condos, multi-family, and commercial properties. For California, these are also the properties that have substantial equity.

Refinancing with a hard money loan is a good solution if you have equity and need cash. It’s much faster than getting a loan from a bank. We can close in as little as seven days.

Here are some examples of how hard money refinance can help you:

Commercial properties

Keeping your properties rented is vital. Otherwise, you could be in the red rather quickly. But what happens if you have tenants that trash the place and leave you with a mess? And in most cases, a security deposit doesn’t come close to paying for the repairs. The problem is – you don’t have enough money to make the repairs. Plus, you’ve been to every bank in town, and they turned you down. That’s where a hard money loan can help.

The funds you receive can get your commercial property rented again. And if you’re considering selling down the road, having a consistent rent roll is vital.


You have a great condo rental in a good area, but it’s dated. You want to sell it, but you know you wouldn’t get anywhere near what it’s worth in its current condition. Your bank and other lenders have turned you down. With private money cash-out refinance, you get the money you need. You decided to do many of the upgrades yourself to save money. After a year of fixing up the condo, you’re finally ready to put it on the market. It gets sold right away for more than your asking price. You pay back your CA hard money loan and pocket a nice profit.

Rental properties

Every landlord knows how hard tenants can be on a home. Just like with a commercial property, often, the damages far exceed the security deposit. If your rental is trashed and you need to do repairs to rent or sell – a CA hard money loan could be the answer. It’s much faster than conventional financing. That means you’ll be able to get your property rented or sold much quicker.

Distressed Properties

Sometimes a relative or relatives are willed a property in bad condition. Whoever inherits it just wants to sell the property.  But after taking a look at it, they realize there is a lot of deferred maintenance. No one has the money for the repairs (at least they’re not volunteering)! The bank won’t lend on the property because the roof is bad and there’s extensive dry rot. A hard money loan is a solution to get the work done and the property rented or sold.

Primary and Second Homes

Private funding is also available no matter what the occupancy is. We can loan on your primary home (as long as you are a business owner and need the funds for business) or an investment property.

We’ve helped many business owners who have had a tough time staying afloat in 2020. By tapping into the equity they have, they can use that money to keep their business open.

Types of Hard Money Borrowers

Who are hard money loans for?

Hard money loans are for borrowers who cannot get traditional funding. We’re not your first stop. Most likely, we’re your 5th or 6th stop after being turned down everywhere else. Private money loans are also for borrowers who need money quickly.

Owner Occupied

We can refinance single-family homes in California that are owner-occupied. Not all lenders can. You just need to be a business owner and confirm that the funds are giong towards the business.

Who Aren’t Hard Money Loans For?

Hard money loans are for more experienced borrowers. They are not for first-time homebuyers with little real estate experience. They should get traditional funding.  Seniors with fixed income should also stay away from hard money loans and possibly let us assist with a Reverse Mortgage.

Types of Hard Money Borrowers

How to Qualify for a Hard Money Loan

The process is pretty straightforward. You just fill out an application or call and tell us about your property or the one you want to buy and your situation. We’ll let you know what your options are. If they seem acceptable to you – we’ll send you paperwork to e-sign, and we’ll start the processes.

How much down payment is required on a purchase?

A buyer must have at least 30% of the purchase for a down payment. That is over and above any renovation costs.

Credit Requirements for Hard Money Loans

A credit score isn’t as important as property value, equity, and lien position. 

Future Sweat Equity Doesn’t Count

Any private money lender wants to know what the property is currently worth – not once it’s fixed up. That’s because they’re lending on the property as-is.

Hard Money Refinances

Loan-to-value is a case-by-case basis, but we’ll loan up to 65% – 70% of the current value.

How long does it take to close?

We can close your loan in as little as seven days. That could be ten times faster than banks.

When you need money fast, contact
California Lending at 1.800.315.0043. We offer hard money loans for commercial and residential properties all over California. 

Contact Independent Lending

Call 949.830.3151 or fill out our web form for a call back. At Independent Lending, we give every loan request the respect it deserves.

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