What Is a Hard Money Loan and Should I Use One to Buy a Home in San Diego?

What Is a Hard Money Loan?

A hard money loan is a short-term, asset-based loan from a private lender — not a traditional bank — where the primary qualifying factor is the value of the property being purchased rather than the borrower's credit score or income. Hard money loans close quickly, often in 7 to 14 days, but carry significantly higher interest rates and short repayment terms.

Hard Money Loan Characteristics

• Interest rates: Typically 8 to 15 percent or more — significantly above conventional mortgage rates
• Loan terms: 6 months to 3 years — not a long-term financing solution
• Loan-to-value: Typically 60 to 70 percent of the property's value or purchase price
• Points: Typically 2 to 5 points charged upfront in addition to the interest rate
• No income verification required — the property is the primary collateral
• Closes in days, not weeks — speed is the primary advantage

When Hard Money Makes Sense in San Diego

• Investor purchasing a fixer-upper to flip — plans to renovate and sell within the loan term
• Buyer who cannot qualify for conventional financing due to recent credit issues or complex income
• Time-sensitive situation where standard financing cannot close fast enough
• Bridge financing in situations where traditional bridge loans are not available
• Commercial or mixed-use property where standard residential loans do not apply

When Hard Money Does NOT Make Sense

For a primary residence purchase where you plan to live in the home long-term, a hard money loan is almost never appropriate. The extremely high cost of hard money financing — plus the short repayment window — makes it unsuitable for most owner-occupant buyers. The mandatory refinance or payoff at the end of the term carries significant risk if market conditions change.

Hard Money Lenders in San Diego

San Diego has an active private lending community serving real estate investors and developers. Rieder Homes Group works with investors who use hard money financing regularly and can provide referrals to reputable local private lenders for the appropriate situations. Always work with a California DRE-licensed lender and review all terms with a real estate attorney before proceeding.

Related Reading on RiederHomes.com:

→ Blog #3: Types of Home Loans

→ Blog #2: Mortgage Pre-Approval

→ Blog #12: Jumbo Loans San Diego

→ Blog #30: Bridge Loans for Buyers

— Mance Rieder, Broker Associate | Rieder Homes Group | REAL Broker | riederhomes.com | 858-295-0556