Hard Money vs Private Money in Florida: Two Lenders Who Do Not Use Your Tax Returns
Hard money vs private money Florida investors compare are both asset-based, short-term and fast. One is a business with published terms; the other is an individual with a relationship. The paperwork should be the same.
Educational content only. This article is for informational purposes and does not constitute financial, legal, or lending advice. Loan programs, rates, and eligibility requirements change frequently. Consult a licensed mortgage professional before making any borrowing decision. Mortgage Capital | NMLS# 1859012 | Licensed in Florida.
Hard money vs private money Florida investors compare are both asset-based loans that close fast and ignore your tax returns.
A hard money lender is a business with published terms. A private money lender is an individual you know. The documents should be identical. Our hard money page covers the first.
Hard money
Licensed or exempt lenders funding from their own capital or a pool of investors.
See our guide to hard money lenders in Florida.
Rates in the low to mid teens, points up front, terms of six to eighteen months.
Underwriting on the property's value and the exit.
Days to fund.
Private money
An individual, often a friend, family member or fellow investor, lending personal funds.
Terms are negotiated case by case.
Rates can be lower than hard money or higher, depending on the relationship.
No published guidelines.
Speed depends on the person.
Same structure, different counterparty
Both should be secured by a recorded mortgage and a promissory note.
See our guide to Florida doc stamps and intangible tax.
Both pay doc stamps and intangible tax.
Both should require title insurance and hazard insurance.
A private loan on a handshake is the mistake.
Cost comparison
Hard money: two to four points plus the rate plus fees.
Private money: whatever you agree, often rate only.
See our guide to rate versus APR in Florida for comparing fee-heavy loans.
On a six-month flip, points dominate the cost.
A private lender at a higher rate with no points can be cheaper.
Reliability
A hard money lender funds when the file is complete; that is their business.
A private lender may change their mind, need the money back, or be slow.
See our guide to buying at auction in Florida for where reliability matters most.
For a deadline, hard money is safer.
For flexibility, private money wins.
Regulation
Florida regulates mortgage lending; business-purpose loans have exemptions.
A private lender making several loans a year may need a licence.
The Florida Office of Financial Regulation oversees it.
Owner-occupied loans carry consumer protections neither lender should ignore.
Keep private money to investment property.
Usury
Florida caps interest on loans, with higher caps for larger loans and business purposes.
A private loan above the cap is a problem for the lender.
Hard money lenders structure around it.
An attorney checks the rate against the statute.
Ignorance is not a defence.
The exit
Both are bridges to a sale or a refinance.
See our guide to fix and flip loans in Florida.
A DSCR or conventional refinance pays off either.
See our guide to delayed financing in Florida.
Define the exit before the loan.
Documentation for a private loan
Promissory note, mortgage, title policy, hazard insurance naming the lender, a closing through a title company.
See our guide to title insurance in Florida.
Record the mortgage.
Both parties get copies.
The same package a hard money lender would require.
Family lenders
Money from relatives is common in South Florida real estate.
See our guide to gift funds in Florida for the non-loan version.
A loan must be documented as a loan or the IRS may treat it as a gift.
Interest below the applicable federal rate has tax consequences.
A written note protects the relationship.
Draws and rehab
Hard money lenders fund rehab in draws with inspections.
See our guide to construction loan draw schedules in Florida.
Private lenders often fund the whole amount at closing.
Simpler; less protection for the lender.
Agree the draw process in writing either way.
Default
Both can foreclose under Florida's judicial process.
See our guide to the foreclosure process in Florida.
A hard money lender has done it before.
A private lender may not know how.
The mortgage document should spell out remedies.
Seasoning for the refinance
Lenders refinancing a hard or private money loan want to see the loan recorded and the rehab complete.
See our guide to BRRRR in Florida.
An unrecorded private loan cannot be paid off through a refinance cleanly.
Record it.
The payoff letter comes from the lender, private or not.
Combining them
Private money for the down payment on a hard money loan.
Some hard money lenders prohibit secondary financing.
Disclose it.
A hidden second lien is a default under most notes.
Structure it with both lenders aware.
Which to use
Deadline, unfamiliar lender, rehab draws: hard money.
Trusted relationship, flexible timing, lower cost: private money, documented like hard money.
First deal: hard money, for the discipline.
Tenth deal: whichever is cheaper.
Never a handshake.
Reading the term sheet
Rate, points, term, extension fees, prepayment terms and default interest.
Default interest on hard money can double the rate after a missed payment.
Extension fees add points if the project runs long.
Ask for every fee in writing before the appraisal is ordered.
The term sheet is the loan; the pitch is not.
Where to start
Get a hard money quote as the baseline.
If a private lender beats it, have an attorney draft the same documents.
Then start a conversation about the refinance that takes either one out.