About Hard Money Construction Loans
New construction hard money loans are asset-backed loans collateralized by real estate. The builder who takes out such a loan is typically unable to secure a conventional loan from a bank, a common issue in today's construction market. For that reason, he or she is generally willing to pay a higher rate of interest to a private money lender in order to close the transaction. Construction loans often include funds for purchasing raw land as well as for building costs, which are paid out in periodic "draws" once the builder has met some pre-defined milestones. Due to the higher risk associated with these types of loans, the lender will generally require the borrower to contribute some of their own cash or equity to the deal. Additionally, borrowers will often have input into the project plans, particularly relating to the timelines and budgets.
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