The Financial Crisis of 2007-2010 put a target on the mortgage industry. New Federal Regulations are in place that have modified the differences between HARD Money Loans and Portfolio Loans. Today, they serve very different borrower needs. Let’s look at the differences.
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Who are HARD Money loans good for for?
Borrowers who are are need of short term financing. HARD Money loans are not long term mortgage solutions.
Borrowers who are OK with paying high interest rates.
Borrowers who need financing on an investment property. HARD Money Loans are typically not available for primary residences or second home residences.
Borrowers who don’t want to OR who are unable to document their income or assets.
Borrowers who are going to put down 20% or more down. HARD Money Loans typically only are concerned about the equity in the home.
Borrowers with a recent Foreclosure, Bankruptcy, or Judgement are typically still eligible for a HARD Money Loan.
Borrowers who need to close a purchase or refinance VERY QUICK (within 1-7 days).
A HARD Money loan is a good fit for a home that is not livable and needs lots of repairs.
Who are Portfolio Loans good for for?
No Income and No Employment Needed
You will need a minimum of 25% down. This can be a gift from a relative.
Borrowers who need financing on a Primary residence. They are also available on a second homes.
A portfolio loan will typically allow higher loan amounts than hard money. For example, loan amounts up to $3 million dollar loan are possible.
Portfolio Loans will have much lower interest rates than HARD Money Loans.
If a borrower is not eligible for a Conventional, FHA, or VA loan due to a recent Foreclosure, Bankruptcy, or Judgement, a portfolio loan could work. For example, even if a borrower had a foreclosure 1 week ago, they would still be eligible for a Portfolio loan.
Portfolio Loans generally will take 30 – 45 days to close. You won’t be able to close this loan with rapid speed like a HARD Money loan.
The home has to be in good and livable condition. It cannot be in need of repairs to make it livable. This is essentially the same requirement as a Conventional loan.