Hard Money Loans
Unlike standard real estate loans, hard money loans are based on the property and details of your project, not your credit score. At Primacy Mortgage, we offer simple and straightforward hard money loans to companies and individuals for business loans, commercial and residential real estate, bridge loans, and more.
How Does a Hard Money Loan Work?
A hard money loan or bridge loan is a type of short-term financing that's often used to finance an investment project. Hard money loans are most often used by real estate investors and develops to develop or renovate a property and sell it for a profit. Unlike a standard mortgage, a hard money loan is funded by private lenders, not mainstream banks.
Hard money loans are not based on your credit score, they are based on the value of the property and the details of your project. Hard money lenders use the value of the property and the after repair value (ARV) to estimate what the property will be worth after development or renovations are complete. While a bank loan can take at least 30 days to fund, a hard money loan can be funded in a matter of days thanks to little documentation requirements or underwriting.
Hard money loans are designed for short-term financing for business and real estate projects, not long-term investments. This means a hard money loan is ideal for flipping property, rehabbing property, or short-term purchase financing.
Who Uses Hard Money Loans?
Hard money loans can be appropriate in many cases. These loans are most often used by developers and investors for short-term financing but a hard money loan can be appropriate in many cases:
-- Borrowers who have poor credit to finance the purchase of a primary home
-- Avoiding foreclosure
-- Tax liens or judgments that prevent a mortgage
-- Short-term rehab loans to fix and flip
-- Short-term development loans
-- Foreign nationals
-- Complex loans that use several pieces of collateral
-- Fast closing needed within days for REO, auction, or other time-sensitive opportunity
-- Creative lending solution needed
-- Working capital for a business
Our real estate hard money loans offer a fast loan process with funding in as little as two to five business days. At Primacy Mortgage, we work with investors buying real estate auctions, trustee sales, short sales, REO, private party sales, and residential and commercial construction projects.
Rehab loans are a unique niche loan provided by hard money lenders with a greater understanding of real estate rehab projects than standard lenders. A rehab loan will consider many factors, not just the purchase price of the home, to give you working capital to fund your investment. This includes:
-- The purchase price of the property
-- The upside potential
-- Extent of the project. The riskier and more substantial the project, the lower the loan-to-value of the loan. Residential properties requiring minimal work have less risk for a lender than multi-unit properties requiring substantial repairs.
-- Personal finances. The stronger the investor's personal finances, the better the chance of being approved with more favorable terms.
-- Experience. The investor's experience also plays a role. If it's your first rehab project, you may have trouble getting approved or the terms may be less favorable with a lower loan amount. Investors with more experience rehabbing properties are lower risk to lenders.
Why Choose a Hard Money Loan?
Hard money loans aren't for everyone, but these loans offer several unique advantages you won't find with a loan program from a major lender.
One of the most important benefits is the fact that hard money loans have no formal documentation and underwriting process. This means loans are funded much faster, sometimes as quickly as 48 hours. When time is of the essence, especially when it comes to time-sensitive real estate deals and business cash flow, a hard money loan can be the only option.
Hard money loans are also an option when a bank will not approve a project. This includes asset development, business capital loans, bridge loans, and complex real estate investments.
Unlike a mortgage, a hard money loan is paid over a very specific timeframe with clear and simple loan options. The repayment schedule for your loan can typically be tailored to your needs and you can negotiate most fees of the loan. A hard money loan is generally much more expensive than a traditional mortgage, but it's designed to fit non-traditional needs with the flexibility, fast funding, and customization options you need.
Hard money loans aren't the right financing solution in many cases. There are two major drawbacks to consider: cost and short repayment term. Hard money loans offer excellent convenience, but there is a price. Hard money loans are typically many percentage points above a conventional loan with higher origination fees and prepayment penalties. These loans are also designed to help investors get property on the market as fast as possible so the repayment period is much shorter. Hard money loans are not designed for long-term financing.
If you are a real estate investor, developer, business owner, or you are otherwise interested in the benefits of a hard money loan, contact Primacy Mortgage today for a customized loan program to fit your needs.