The vast majority of loans secured by real estate are institutional, with the loans originated and funded by banks, credit unions, and insurance companies. Private money, or ‘hard money’ lending, provides mortgage loans to borrowers who cannot be approved for a mortgage through a conventional lending source. Private money loans are generally made by companies like ACM that specialize in these types of loans. These companies aggregate funds that come from individuals, or small groups of individuals, often through their retirement plans.
Private money loans have higher interest rates and fees than a conventional mortgage. Most business purpose loans have interest-only payments and terms from 1 to 5 years. All consumer purpose loans are 30 year loans with the interest rate fixed for the first five years, and a fully amortizing payment.