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Massachusetts Hard Money Loans
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Often, when people think of a real estate loan, they think of the typical 15-year or 30-year home mortgage. However, there are many circumstances in the real estate market where a standard mortgage is not feasible. If a buyer needs money as soon as possible in order to make a real estate purchase, a hard money loan could be the answer.
Hard money loans are a lesser-known category of real estate loans. Instead of analyzing a borrower’s ability to pay, the lender of a hard money loan reviews the value of the loan collateral, which is the property, itself. There are several types of hard money loans in the market today.
1. Fix-and-flip loan. This loan is intended for someone who wants to buy a property, rehab it, and then put it back on the market for a quick sale. The loan is then paid off.
2. Bridge loan. This style of loan allows someone to quickly buy a property and then resell it. The loan could also be used as a down payment on a new property while the borrower waits for the sale of a current property.
3. Construction loan. If a real estate developer wants to begin a new construction project with the aim of quickly refinancing or selling it, a construction loan will provide the financing to do so.
4. Owner-occupied loan. These loans are used by borrowers that may not qualify for other financing, but intend to live in the property they purchase as their primary residence.
A distinguishing characteristic of hard money loans is that they are short-term real estate loans, usually with a maximum of three years. During the life of the loan, the borrower may only be required to pay the interest amount. At the end of the loan term a balloon payment is made, which covers the entire principal of the loan.
Despite the fact that hard money loans and traditional bank loans are both used to finance real estate purchases, they have significant differences. One main difference is that hard money loans are provided by private individuals or organizations, and not by typical banks. The extremely short repayment period of hard money loans comes with high interest rates, compared to traditional bank loans. However, while bank loans have a lengthy application process, hard money loans have an easier application and approval process. Furthermore, hard money lenders are concerned with the value of the real estate collateral, whereas conventional banks focus on credit scores and income.
When considering a hard money loan, a borrower should review both the positive and negative aspects of this type of loan. On the one hand, a hard money loan offers the benefits of quick access to funds, more lenient requirements than traditional loans, and customized terms. On the other hand, hard money loans do have relatively high interest rates and can have high fees. Another point to consider is that hard money loans have little government oversight, so borrowers must do their research and take caution when choosing lenders.
Once a borrower decides to secure lending through a hard money loan, there should be a variety of options available because of the non-traditional and varying nature of the lenders. The best way to find a hard money lender is to ask real estate investors in the local area. The reputation and quality level of lenders will be known in the real estate community. After narrowing down the list of lenders, the borrower should still do further research on the processes and reliability of the lending individual or company. Because hard money lending is not tightly regulated, it is important to put in the time and effort to find the best lenders.
Deciding how you want to proceed with your business is a crucial step. You may be tired of renting a building. You may also be looking to buy a building to coincide with opening your business. Whatever the situation might be, it’s important to have space that you can call your own.
There are plenty of options available. Whether you’re looking to build from scratch or expand an existing property, you will want to look at the costs involved with the project. At Delancey Street, we can show you the creative financing options that are available to you.
With Massachusetts new construction loans, you can get started in Boston, Salem, Worcester, or anywhere else in the state.
Why Massachusetts New Construction Loans Should Be Considered
It might take hundreds of thousands of dollars to build the property that you want. You may be prioritizing a storefront, office space, or even a warehouse. Whatever it is, you need a construction plan. From there, you have to figure out how you’re going to pay for it. You likely don’t have the money to pay for the whole thing up front.
New construction loans in Massachusetts can provide you with the funding that you need.
What You Need to Know About a Commercial Construction Loan
Many businesses choose commercial construction loans over commercial mortgages. There are a few reasons for this.
First, commercial mortgages can be difficult to obtain. The lender is typically a traditional bank that wants you to fill out an extensive application. Plus, they’re going to look for you to have an above-average credit score.
Second, a commercial mortgage doesn’t have much flexibility. You will get the entire amount as a lump sum in the beginning and provide you with a 10-year repayment plan. In some instances, the mortgage will only be for existing properties, too.
A new construction loan allows you to establish a schedule for when you’re going to get the money. After each step is performed, an inspection is conducted before more funds are released. When it’s done, you can pay in full or finance the amount you have borrowed with the property serving as collateral.
What to Look for in a Lender
There are a lot of lenders that will provide you with new construction loans in Massachusetts. It’s important to consider what their reputation is so that you can decide if you want to do business with them.
Every lender is going to vary based on what they offer as well as the cost of doing business with them. You will want to look at a few things:
- The required down payment
- The number and amount of fees
- The interest rate assigned to your loan
New construction loans are considered high-risk, so it’s important to look at what kind of down payment will be requested of you. Further, the fees and interest rate will impact how much you spend on your loan overall.
You don’t have to do all of the research on your own. Delancey Street lenders will make it easy for you to find a loan that works for your business in Massachusetts. The entire process is personalized to get to know you and your financial needs.
Contact us today to get started on a new construction loan so that you can take your business to the next level.
If you’re a real estate investor who rehabilitates properties for resale, we have good news for you! Our company now offers hard money loans to provide you with funding within days rather than weeks or months. Our flexible loan programs can accommodate nearly any type of investor. Even if you’ve been turned down by local banks or finance companies, we’ll probably be able to help. You’ll have the opportunity to take advantage of great deals and make more money.
What is a Hard Money Loan and How Do they Work?
Hard money loans are designed for investors who are looking for a bridge loan to make an immediate property purchase or to rehabilitate properties for resale. The loans are structured differently than their traditional loan counterparts. With a hard money loan, the term tends to be much shorter. The typical term is one year or less and the maximum term is usually no longer than five years. Due to the convenience of these loan products the interest rates tend to be higher and the payments typically are covering only interest. Other common loan types include balloon repayment and adjustable rate loans. Although the terms may not be as appealing, the benefits far outweigh the setbacks.
Hard money loans also focus on the property rather than on the borrower. This means that less than perfect credit is acceptable. Since many investors have assets and are self-employed, these factors are also considered. The only requirement is that the project must have a strong likelihood of making a profit. These concessions afford many investors a new opportunity to take on more projects and increase their income.
What Differentiates Hard Money Loans from Traditional Loans?
A traditional mortgage loan is typically government backed by one of many agencies. The underwriting guidelines tend to be much more rigid and focus heavily on the borrower’s ability to repay the loan. Many times, unless the borrower can provide a significant down-payment, they’ll be required to maintain mortgage insurance. This can add a significant amount of money to the monthly mortgage payment. These loans also take a significant amount of time to approve if there’s any questionable items. Heavy documentation requirements for income, assets, employment history, and more are required. This tends to dissuade borrowers that fall outside of the traditional lending guidelines.
A hard money loan is a non-conventional form of financing. While these loans are required to follow some lending guidelines, much greater flexibility is afforded in the approval process. Overall, hard money loans are a great solution to those who need to conduct business quickly and appreciate the convenience factor.
What’s Required for a Hard Money Loan
To pre-qualify for a hard money loan, a specific property must be selected. Any information that’s able to support the after-repair value of the home is also taken into consideration. If a recent appraisal has been conducted, it should be submitted at the time of application. An updated appraisal will be ordered to ensure the resale value is realistic for the home when compared with similar home sales in the area. Business and personal financial records may be requested and should be made available for inspection.
How Do I Apply for a Hard Money Loan
To apply for a hard money loan you’ll want to utilize our online application. It takes only a few moments to complete. You’ll then be contacted by one of our courteous and professional loan representatives. They’ll discuss your options and explain how to proceed with the application. Get in touch with us online or by phone for your hard money loan today!
What Is a Hard Money Loan?
This is a type of financing meant only for real estate investors and developers. If you can show a need for quick cash to close a deal on a piece of property that will have built-in collateral already, you might be a prime candidate for a hard money loan. One of the major advantages is the fact that the application process is much more streamlined. This is not a conventional mortgage, you are looking at getting the cash you need in less than a week in many cases.
Here are some specific types of loans that you might be looking at.
A Loan To Fix and Flip a Property
Massachusetts has many homes and office buildings that are in need of repair. These can often be purchased quite cheaply. If you have found a good deal, you might want to talk to Delancey Street about the possibility of getting a fix and flip hard money loan. You will get the cash you need to buy the property. Then, you will immediately set to work on remodeling the building, after which you will hopefully sell it for a nice profit. It is then that you will pay off the loan in full.
A Loan To Occupy a Building
Remember that hard money loans are meant to be a short term financing solution, and that they are typically for investment and development purposes. As such, it is not common to see them be granted for the purposes of occupying a dwelling, but that is not to say it doesn’t happen. This type of loan would be to purchase a home or building that you personally intend to occupy, working then to refinance the loan or demonstrating how it will be paid off within a few years.
A Bridge Loan
With this particular loan, you are meant to quickly purchase a property that you will then sell right away. You might also have another property that is closing not long after you get this loan, and you will then use those proceeds to pay off the new deal. Another possibility is to refinance the loan.
A Construction Loan
There are many pieces of land around Massachusetts ready to be developed. If you need money to get that construction started, this is the type of hard money loan you would look for. You will get the cash you need to complete the structure, after which you will sell it or refinance the loan.
Contact Delancey Street
You will not be going through a traditional bank lender to get a hard money loan, as you would for a conventional mortgage. If you are ready to discuss your options, you can just contact Delancey Street to get the process started. You will find that the process is much easier than you were expecting and that this is a way to finance short term deals and get you the capital you need to continue investing in Massachusetts real estate.[flexy_breadcrumb]