Hard Money Refinance

Five Common Reasons for Hard Money Loan Refinance

Your Current Hard Money Loan is Due

Most of our refinances are refinances of other hard money loans.  What are the reasons to refinance one hard money loan into another?  The most obvious answer is when your loan is coming due, but you are not quite ready to sell it. Once your loan is due, your current lender can declare it to be in default and start charging you a default rate.  A default rate on a hard money loan can easily exceed 20% taking a considerable chunk out of your profits.  Check your closing documents and especially the Promissary Note to find out exactly what rate you will be charged once your loan matures. One sure way to resolve the situation is to find another lender who can pay off your obligations to the original lender, remove their lien of the title, and instead secure their lien.

You Need More Money to Finish Rehab

Some rehabbers don’t just run out of time to complete your rehab – they run out of money.  A new hard money lender might be able to tap into additional equity in the property, refinancing your existing hard money loan and providing the needed funds to finish up the renovations.

Over the last ten years, the Washington, DC-area real estate appreciated over 163% placing it in the top 10% nationally. That means that on average, a DMV property home increases in value by more than 16% a year. Some rehabbers have been able to take advantage of these tailwinds to get extra funds to complete their projects.

As we all know, “the past performance is not a predictor of the future results.” Such appreciation rates might not and probably will not be sustainable in the future. While as a lender will use every ounce of equity to provide you as much leverage as possible, the best practice is not to rely on appreciation to get extra funds for renovations (or evaluate your profit potential). Instead, the key is to move fast and manage the rehab project as efficiently as possible.

You Have Another Business or Investment Opportunity

Another reason why a borrower might want to refinance a hard money loan is to get the funds to capture other business opportunities. For example, consider this scenario. The renovations are completed and the home is on the market but the money is still trapped there until it is sold.  You just found an amazing opportunity to buy a home in the DC area for well under its market price but need to move fast. You technically have money but you are not liquid.

Since 2006, we have helped hundreds of DMV real estate investors to gain the liquidity they need to keep them nimble. If you have equity in an existing property, we will find a way to tap into it. One way to do it is to refinance your current loan into a short-term (or a micro-term) loan commonly referred to as hard money bridge loans. Our hard money bridge loans can be secured against a single property or, when appropriate, can involve multiple properties at the same time.

You Purchased a Property in Cash and Need Money to Rehab It

Perhaps you’re one of those well-heeled investors who can actually purchase a home listed as “cash-only” fully in cash. Good for you! I am sure you’ve worked hard to get to this position. The benefits of being an all-cash buyer are numerous, with speed and lower costs of doing business being just two of them. However, there is one definite problem with cash: sooner or later it tends to run out. To keep buying, to keep building, to keep earning profits you need leverage. And leverage is what our hard money refinance loans provide you with.

Supposed you purchased a property for $250,000 and paid for it in cash. You were planning to pay for rehab as well but had to spend this money pursuing other opportunities. Our loan will provide you with the cash you need for renovation regardless of your credit score or your income.

You are a lucky heir looking to maximize that wealth

If you’ve inherited a property, sometimes it pays off to renovate it before listing it on the market. However, your relatives whose property you’ve inherited might have not bequeathed you much cash. The solution? A hard money loan to provide the renovation funds need. Though on their surface such cases might not look like a refinance (there is no loan on the property), they are definitely not a purchase either, since there are no changes to the ownership.

Unlike many other private lenders, we have no minimum loan amount, so even if you’re looking for a loan of just $50,000, we can help.  In the scenarios when a property is free and clear, we can often roll your loan payments into a loan to help avoid the future hassle of paying monthly.