What hard money loan means

A hard money loan is a type of short-term financing secured by real property, where the lender's primary consideration is the value of the collateral rather than the borrower's income, credit score, or financial history. The term "hard money" refers to the fact that the loan is backed by a hard asset, meaning real estate, rather than the borrower's creditworthiness alone. Hard money lenders are typically private individuals or companies, not banks, credit unions, or federally regulated mortgage lenders.

Hard money loans are characterized by shorter terms than conventional mortgages, typically ranging from a few months to a few years. They carry higher interest rates and upfront fees to compensate the lender for the increased risk and the cost of making lending decisions quickly without the full underwriting infrastructure of a bank. The speed and flexibility of hard money lending is the primary appeal. A hard money lender can often fund a loan in one to two weeks, while a bank may take 30 to 60 days or longer.

Hard money loans are used in a variety of situations: fix-and-flip real estate investing, bridge financing while permanent financing is arranged, situations where conventional financing is unavailable due to property condition or borrower circumstances, and specialized contexts like trust and estate administration where the borrower is a legal entity (a trust or an estate) rather than an individual consumer.

Why it matters for trust and probate loans

Trust loans and probate loans from North Coast Financial are a specialized form of hard money lending, underwritten on the value of the real estate rather than the borrower's income. The key difference is that we focus exclusively on trust and estate contexts, which require specific knowledge of California probate and trust law. A general hard money lender who is unfamiliar with probate estates or irrevocable trusts may decline these transactions or make errors in the loan structure that create legal complications for the trustee or administrator.

North Coast Financial has been funding trust and probate loans in California since 1981, with over $1 billion funded. We understand trust certifications, Letters Testamentary, IAEA authority, and the fiduciary considerations that apply when a trustee or executor borrows on behalf of the estate or trust. Interest rates on our California trust and probate loans run from 9.95% to 10.5%, with origination fees of 1.25 to 1.95 points. There is no prepayment penalty, no appraisal fee, and no lender document fees. Minimum loan amount is $30,000.

Related terms

See also: Bridge loan, trust loans California, probate loans California, and inheritance advance.

Frequently Asked Questions

Why can't a bank lend to a probate estate or trust?
Banks and conventional mortgage lenders are set up to make loans to individual borrowers with verifiable income, credit histories, and standard ownership of the collateral property. A probate estate or irrevocable trust presents a fundamentally different borrower profile: the borrower is a legal entity, the owner-occupant underwriting metrics don't apply, and the loan purpose is often temporary administration rather than long-term ownership. Conventional lenders do not have the legal knowledge, underwriting frameworks, or appetite to evaluate these loans. Private money lenders who specialize in this space do.
Are hard money loans regulated in California?
Yes. California hard money lenders must be licensed by the California Department of Real Estate (DRE) as mortgage brokers or by the Department of Financial Protection and Innovation (DFPI) as finance lenders. They are subject to California usury laws, disclosure requirements, and other consumer protections, though many of the strictest regulations apply primarily to owner-occupied residential loans made to individual consumers. North Coast Financial holds DRE Broker license #01870870 and NMLS ID 323044 and has been lending in California since 1981.
What loan-to-value ratio does a hard money lender typically use?
Hard money lenders typically lend up to 60% to 75% of the property's as-is fair market value, though this varies by lender and by the type and location of the property. For trust and probate loans, North Coast Financial's LTV is based on the current value of the property, not its potential future value after improvements. LTV is one of several factors in the loan analysis, alongside the property's condition, marketability, location, and the legal structure of the trust or estate.