Hard money loans, also known as private money loans, are home equity driven mortgage loans funded by private investors and companies using their own money secured by a real estate trust deed, eliminating the common qualification and underwriting guidelines of prime (regular) and sub-prime (bad credit) lenders. HEM educates borrowers online the pros and cons of hard money HELOCs and private home equity loans.
Hard Money Home Equity Loans, HELOCS and Refinancing
Home Equity Mart’s expertise lies in providing timely financial solutions to individuals in need of equity loans and hard money financing. We recognize that not everyone possesses impeccable credit, which is why we extend our services to those in dire need, offering swift approvals and adaptable terms.
With a hard money HELOC loan, you can secure the funds necessary to expand your business without the hassle of traditional banking procedures. We will help you find local hard money lenders that will tailor specifically for personal business proprietors seeking rapid access to capital, these loans offer an expedited solution to financial needs.
Find Savings When Refinancing Debt with Hard Money
Many homeowners want to consolidate high rate debt with a HELOC. It makes sense to leverage your property if you can easily find meaningful monthly savings. Reducing credit card interest rate can be a pragmatic way to accomplish this from a home equity loan for low credit scores. If your fico scores drop below 560, you may need a hard money lending program. The Home Equity Mart can help you find private lenders that provide special hard money loans for cash out and refinancing.
What Is the Benefit of Using a Hard Money Lender?
Hard money loans serve as a short-term borrowing option, favored particularly by real estate investors, although they can also serve as a valuable resource for borrowers possessing assets but facing credit challenges.
Can I Get a Hard Money Credit Line for Business?
A business purpose loan denotes a mortgage intended for commercial or investment endeavors.
- A real estate investor’s undertaking of a fix-and-flip project.
- A home builder’s construction of one or more residences.
- A 12-month bridge loan for an investment property.
- A pre-development land loan for a real estate developer.
Virtually all hard money mortgage lenders exclusively offer business purpose loans, contrasting with consumer purpose loans designated for personal or household use. Instances of consumer purpose loans encompass financing for primary residence acquisition, personal credit card debt consolidation or home renovation projects.
Can I Buy an Investment Property with a Hard Money HELOC Loan?
Opting for a hard money equity loan can prove advantageous when acquiring an investment property. Home Equity Mart will help you uncover hard money lenders that prioritize the property’s value over your credit score. On the other hand, borrowers with subpar credit may still secure a hard money line of credit for investment property purchases.
What Are the Terms of a Hard Money Equity Loan?
The repayment duration of a hard money loan typically ranges from six months to a few years, reflecting its short-term nature. In contrast, traditional mortgages generally feature longer repayment terms spanning from 15 to 30 years. The hard money interest rates are dramatically higher than traditional mortgages because the risk factor is so high for private lenders. The hard money closing costs and lending fees are significant higher than conventional mortgages as well.
Do hard money loans require equity?
Yes, hard money loans almost always require equity since they are asset-based. Lenders prioritize collateral value over credit, so substantial equity in the property reduces their risk. Typically, borrowers need at least 25%–40% equity, depending on the property type and lender guidelines. Higher equity can improve approval chances and possibly secure better terms. Without sufficient equity, most hard money lenders will not extend financing, as the property serves as the primary protection against default.
What is the minimum credit score required for a hard money HELOC?
Unlike traditional lenders, hard money lenders focus more on property value and equity than credit scores. While some hard money HELOC programs may not set a strict minimum, others may require a score around 550–600 to demonstrate some financial responsibility. Non-QM HELOC lenders usually seek 580-600 credit scores. Borrowers with very low scores may still qualify if they have significant equity or strong collateral. However, weaker credit profiles usually face higher interest rates, shorter terms, and stricter conditions compared to borrowers with better credit histories.
What is the LTV requirement for a hard money home equity loan?
Private lenders offering hard money equity loans generally limit loan-to-value (LTV) ratios to 60%–75% of the property’s current market value. Investment properties often face stricter caps than primary residences. Lower LTV requirements protect lenders by ensuring enough equity cushion in case of default. For example, if your house is worth $400,000, you may qualify for $240,000 to $300,000 depending on the home equity lender. Stronger financials, higher equity, or desirable property types may improve the chances of getting favorable terms with private money home equity loans and HELOCs.
Do hard money lenders require down payment?
Yes, hard money lenders typically require a down payment, especially for purchases. Depending on the property and risk factors, the down payment often ranges from 20% to 35%. This requirement ensures the borrower has “skin in the game” and reduces lender risk. For equity-based refinancing, lenders instead require sufficient property equity rather than cash upfront. Borrowers should expect less flexibility compared to conventional loans, but the tradeoff is faster approvals and looser credit standards.
Top 5 Second Mortgage Lenders (per RefiGuide / related sources)
The RefiGuide published a definitive “Top 5 Lenders offering hard money 2nd mortgages” list for all types, it does highlight and partner with many lenders across categories. Here are five notable lenders or providers mentioned in relation to 2nd mortgages and hard money / private second-lien financing:
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Park Place Finance — a hard money lender offering second mortgages nationwide, with fast closings, including DSCR and investment property second-lien deals.
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HouseMax Funding — another private money lender active in second-lien financing, especially for fix-and-flip and real estate investment deals.
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Easy Street Capital — provides private second mortgage solutions with flexible terms for investors or borrowers needing alternative underwriting.
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Wilshire Quinn Capital — offers hard money second mortgages, including for larger loan amounts and nontraditional use cases.
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Express Capital Financing — covers many states and specializes in second-lien financing (residential and commercial) for borrowers who may not qualify via conventional routes. RefiGuide’s Hard Money 2nd Mortgage Lenders
When Lenders Turn You Down Because of Bad Credit
“There are private investors who, if the interest rate is high enough and the perceived risk is low enough, they will put the money up,” says Pam Strickland, owner of Mortgage Consulting Services in Santa Barbara , Calif. These investors, typically called “hard money lenders”, make loans to people who are being turned down due to these and other reasons:
- Borrower’s FICO scores are below 500 due to recent bankruptcy or bad credit;
- Income is unverifiable or borrower lost his/her job;
- Balloon payment on existing loan is due now;
- Foreclosure is imminent;
- Borrower is purchasing odd or non-conforming types of properties (land, mixed use, etc).