Refinancing a hard money loan into another is a viable part of
your real estate investment strategy.
Though we focus on helping our borrowers to purchase investment properties in the DMV area, a portion of our business comes from refinancing. We refinance hard money loans issued by other hard money lenders, free-and-clear properties and, when it makes sense, mortgage loan originated by conventional lenders.
There are two main reasons to refinance a hard money loan. One is to save you money. Another is to help you make it. We can help with both.
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 your rehab is not yet complete. 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 Note to find out exactly what rate you will be charged once your loan matures.
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.
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. A new short-term private loan might be a good way to tap equity.
We also frequently work with borrowers who own a property outright. They might be a well-heeled real estate investor who purchased it in cash or a lucky heir who has inherited a property that is free and clear. They now need a cash infusion to rehab a property to its full potential. Unlike many other private lenders, we have no minimum loan amount, so even if they’re looking for a loan of just $50,000, we can help. In this scenario, we can also roll their loan payments into a loan to help them avoid a future hassle of paying monthly.
How do hard money refinance loans work?
Our requirements to refinance a hard money loan are simple and easy. The equity in the property is the most important element. We base our loans on the after-repair value so if the loan you’re trying to refinance approaches 70% of the after-repair value, chances are we won’t be able to help. All of our hard money loans are no doc, meaning that we don’t verify your income and are not concerned with you meeting a certain debt ratio. As a private lender, we are also unique in not requiring our borrowers to have a minimum credit score. If your hard money loan refinance makes sense, we will find a way to finance it.
Looking to refinance a hard money loan in Maryland, Washington, DC, & Virginia? Let’s us help. Call us today at 240-436-2340 for details.