Everything You Need to Know About 30 Year Hard Money Loans

Hard money loans are a financing option that allows borrowers to get funds quickly in exchange for collateral like real estate. These loans typically come with higher interest rates and shorter repayment terms compared to conventional mortgages.

While most hard money loans have terms of 1 year or less, some lenders offer longer-term loans up to 30 years In this comprehensive guide, we’ll cover everything you need to know about 30 year hard money loans, including

What is a 30 Year Hard Money Loan?

A 30 year hard money loan is a type of hard money loan with a 30 year repayment term similar to a traditional 30 year mortgage. Like other hard money loans a 30 year loan is asset-based, meaning the property itself secures the loan rather than the borrower’s creditworthiness.

With a 30 year hard money loan, the borrower makes monthly payments over a 30 year period until the loan is fully repaid. These loans may be amortized or have interest-only payments followed by a balloon payment.

Who Offers 30 Year Hard Money Loans?

While most hard money lenders focus on short-term financing, there are some private lenders and investor groups that provide 30 year hard money loan options. When looking for a 30 year hard money loan, seek out lenders that specialize in longer-term real estate financing.

Mortgage brokers and attorneys involved in real estate may also have connections to lenders that offer 30 year terms. Online marketplaces like LendingHome and Lendistry connect borrowers with hard money lenders and indicate which offer 30 year loan products.

Pros and Cons of 30 Year Hard Money Loans

Compared to short-term hard money loans, 30 year loans have some distinct advantages and disadvantages to consider:

Pros

• Lower monthly payments – Since the loan is amortized over 30 years, monthly payments are lower compared to a short-term loan for the same amount. This improves cash flow for real estate investors.

• No balloon payment – There is no large balloon payment looming at the end of the loan term. The loan is fully amortized over 30 years.

• More time to repay – Having 30 years to repay the loan reduces the pressure and risk compared to a short repayment timeline of 1 year or less.

Cons

• Higher interest rate – Even with a 30 year term, interest rates are higher than conventional mortgages, often by several percentage points. This increases the total cost over the life of the loan.

• Prepayment penalties – 30 year hard money loans may include prepayment penalties if you pay off the loan early. This reduces flexibility.

• Higher fees – Application fees, origination fees and other closing costs are typically higher with a 30 year hard money loan compared to other financing options.

What are Interest Rates on 30 Year Hard Money Loans?

Interest rates on 30 year hard money loans are generally 8-15%, which is higher than rates for traditional 30 year mortgages. Exact rates vary depending on factors like the loan amount, your credit score, the loan-to-value ratio, and market conditions.

Many lenders charge a higher rate for a 30 year term versus a short-term loan. This compensates them for the increased risk of a longer-term loan. Be sure to shop and compare rates from multiple lenders.

What are the Qualification Requirements?

While credit score and income are not as heavily weighted for hard money loans, most lenders still have qualification requirements:

• Minimum credit score – Many lenders require a FICO score of at least 580-620 or higher. Some may accept a lower score with a larger down payment or higher interest rate.

• Down payment – Expect a down payment of 25-35% or more of the purchase price or appraised value. A higher equity stake reduces risk for the lender.

• Debt-to-income ratio – Your total monthly debt payments, including the new mortgage payment, usually cannot exceed 40-50% of your gross monthly income.

• Property appraisal – The lender will require an appraisal to establish collateral value. The loan amount is based on a percentage of this value.

How much money can I borrow with a 30 year hard money loan?

Loan amounts for 30 year terms vary, but are often between $100,000 and $3,000,000. The maximum amount you can borrow depends on factors like the appraised value of the property, your down payment, and the lender’s maximum loan-to-value ratio.

For investment properties, the rental income may be considered when determining the loan amount. Expect to borrow 50-70% of the appraised value with a 30 year hard money loan.

When are 30 Year Hard Money Loans a Good Option?

Here are some situations where a 30 year hard money loan could make sense:

• Need to close quickly – Hard money loans fund faster than traditional mortgages. This can help you jump on an investment opportunity.

• Investing in a fixer-upper – Hard money loans can fund the purchase and renovation costs for a property that needs work.

• Building a real estate portfolio – 30 year terms allow investors to tap into hard money financing to assemble a portfolio over time.

• Have credit challenges – Hard money lenders emphasize the deal and collateral over your credit score or income. This helps borrowers who don’t qualify for regular mortgages.

• Looking for a higher loan amount – Hard money lenders may provide higher loan-to-value ratios compared to conventional loans.

5 Tips for Getting the Best 30 Year Hard Money Loan

Follow these tips when seeking a 30 year hard money loan:

1. Shop around – Compare loan details like rates, fees, and qualifications from multiple hard money lenders to find the best fit.

2. Negotiate for the lowest rate – Ask if the lender can reduce the interest rate. Higher down payments or strong deal fundamentals may give you leverage to negotiate.

3. Ask about prepayment options – Inquire if you can pay off the loan early without penalties. This provides more flexibility.

4. Get appraisals from multiple companies – Don’t rely on the lender’s appraisal alone. Higher appraisals support bigger loan amounts.

5. Read the fine print – Understand all fees, costs, and penalties before committing. Get help from a real estate attorney if needed.

Alternatives to Consider

If a 30 year hard money loan doesn’t make sense for your situation, here are a few alternatives to consider:

• Traditional mortgage – Conventional mortgages have lower rates and fees compared to hard money loans. Terms up to 30 years are available.

• Short-term hard money loan – A short-term loan of 1 year or less costs less in fees and interest. This can work for quick renovation flips.

• Home equity loan – For homeowners with equity, a home equity loan or HELOC provides access to funds at lower costs than a hard money loan.

• Private money loan – Loans from private individual investors may provide better terms than hard money loans from companies.

• Owner financing – Some sellers may be willing to owner finance a property sale over a longer term of 10 or more years.

The Bottom Line

30 year terms open up hard money lending to longer-term real estate financing, which can benefit certain investors and borrowers. But higher rates and costs mean this option may not be cost-effective for everyone. Carefully weigh the pros and cons for your situation before applying. With the right property deal, 30 year hard money loans can provide access to funds that other lending sources won’t.