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Delancey Street: Long Island Hard Money Lenders
In the world of real-estate finance, the vast majority of projects where cash is not used to cover the entire purchase price involve mortgage financing. Mortgages are extremely popular forms of purchasing residential real estate because they allow buyers to acquire homes that they would almost certainly not be able to afford without access to long-term financing. For most prospective home buyers, mortgages are an appropriate and useful choice.
However, there are some situations where traditional mortgages don’t fit the goals or limitations of a real estate buyer. In many situations where the home needs extensive repairs, or in some way has a seriously compromised current market value, traditional mortgage lenders may view the deal as being too risky for a mortgage. In other cases, the buyer themselves may be viewed as too great a credit risk. If a buyer is involved in too many deals at once, or has highly variable income, traditional home lenders may not be willing to assume what they perceive to be a high level of risk to underwrite a mortgage.
In these situations and many others, a home buyer may want to turn to a form of financing known as: hard money. A Long Island hard money loan is a real estate loan made by an individual investor or group of investors, usually on a short term basis. Because hard money loans are originated by individuals rather than huge corporate banks, the terms of the deal can be almost infinitely flexible. This allows real estate investors to structure deals in ways that are most likely to meet their specific goals. In exchange for increased flexibility, Long Island hard money loans often have higher rate of interest. Paying more interest is usually not a concern as these loans are almost always used as a kind of short-term bridge financing.
Long Island Hard money loans don’t involve extensive due diligence
One of the most attractive features of hard money loans is the incredibly fast underwriting period. Unlike applying for traditional mortgages, which involves banks combing over everything from pay stubs to personal spending habits, hard money loans almost never involve extended due diligence procedures. This is because they are backed by real estate. In most cases, the value of the real estate being purchased supplies a good deal of the collateral. Some hard money loans are also collateralized against other real estate owned by the borrower. Because Long Island hard money lenders typically give loan-to-value ratios of between 50 and 70 percent, they typically don’t care about the borrower’s credit score, income or other cash flows. They know that if something goes wrong, they will easily be able to recoup their principal amount with interest.
Long Island Hard money loans can give real estate investors the edge
The reduced workload, and the high level of flexibility, involved in underwriting these loans mean that hard money loans can often get the borrowers cash in hand within a few days. In some cases, real estate investors who have established relationships with Long Island hard money lenders may be able to finalize new loans and get the money wired on the same business day.
For investors operating in hot real estate markets, this can make hard money loans as good as cash. Often, sellers in markets where the average selling time for a home is measured in a few weeks are hesitant to get involved with buyers who face long waiting periods in securing financing. Doing so would not only preclude better offers, it also would mean the seller may wait months only to have the deal fall through because the buyer wasn’t approved.
Hard money borrowers, on the other hand, can often guarantee a closing with a timeframe of days. This can make the difference between consistently nabbing the best deals and being left. Hard money can also reduce out-of-pocket costs by tremendous amounts, allowing sophisticated investors to more adeptly leverage their capital.
What to do if you’re interested in getting a hard money loan
The next steps are simple. First, fill out the form on our website and contact us. Tell us about your potential opportunity. Typically, we’ll ask for things like
- where the property is, and it’s current condition
- how much money you need and how soon
- how long you need the money for
- what will you do with the money
- what’s your exit plan to repay the money
- send us the appraisal for the property and any inspection reports you have
Once we get this data, we review it to assess the strength of your project. Our main objective is ensuring that the project will succeed – and ultimately, that we’ll be able to recoup our investment in the project. Typically, hard money loans in Long Island can get processed as quickly as 24 hours – assuming everything is in order. It’s best to reach out when you have concrete answers to the questions posed above – and when you’re ready to get started.
If you’re in the market for a real estate loan, then you probably know that not everyone is eligible for the same type of loan. When it comes to conventional mortgages, some people are unable to qualify and end up needing an alternative. Hard money loans are for real estate purposes and often serve as a valuable tool for real estate investors. The information below sheds light on this type of loan.
About Hard Money Loans
Hard money loans are unlike traditional bank loans and hard money lenders make decisions to fund these loans using different criteria. For starters, while banks focus on your ability to repay the loan, hard money lenders are more concerned about your collateral. They make funding decisions on an individual basis without having to follow a template or checklist of requirements. There are different kinds of hard money loans, such as the bridge loan, fix-and-flip loan, owner-occupied loan and construction loan.
The bridge loan is a good option if you plan to purchase a property as soon as possible and then resell or refinance it. In addition, this loan type allows you to buy a property before you have the cash down payment from selling a property you already own. As the name implies, a fix-and-flip loan let’s you fix a rehab property in a short amount of time, sell it, and then pay the loan off. An owner-occupied loan is for consumers who are purchasing a home they plan to live in, but cannot qualify for traditional funding. Real estate developers use the construction loan to start a new construction project that they plan to refinance and sell immediately.
If you are looking for a consumer loan for a private property, you should know that many hard money lenders don’t provide this type of loan because they can be a regulatory nightmare. Owner-occupied consumer loans require compliance with Dodd-Frank, licensing requirements and other laws, which can complicate an otherwise simplified application process.
How Hard Money Loans Work
You might find it interesting to know that hard money loans are usually for a term of about 12 months, though it could be a couple of years. Generally, you will only be required to make monthly interest-only payments instead of equal principal and interest payments. In fact, there are some loans that don’t require you to many any payments at all. The application process for hard money loans is fast and often takes less than a week.
There’s a good chance that you will need cash for a hard money loan. The amount will depend on the After-Repair-Value (ARV) ratio or Loan-To-Value (LTV) ratio. When the term ends, you will pay the loan off in a balloon payment that includes the principal, remaining interest and fees.
How Hard Money Loans Are Different
When you get to the root of hard money loans, you’ll find that they are a lot different than bank loans. While there are some underwriting similarities, and both offer loans for the purchase of real estate, that’s about all they have in common. Hard money loans have a very short repayment period, the interest rates are high, they can sometimes have hidden fees, there is a lack of governmental oversight and refinancing can be difficult.
On the flip side, there are advantages that some people believe outweigh the disadvantages. For instance, you can get access to the money that you need quickly and the process is easy. Further, the requirements are lenient, so if you have a poor credit score, there’s still a chance that you will qualify. They also have flexible terms and lenders are more likely to offer a custom loan product. If you’re a real estate investor, you might find the advantages of a hard money loan compelling[flexy_breadcrumb]