Alternative Mortgages from Real Estate Private Money Lenders
June 2, 2021at9:30 PM
Banks design traditional mortgages for homeowners whose goal is to own a property where they’ll live after retirement. But not every buyer is purchasing their first residence. So those in unusual real estate situations need alternative mortgage products.
Harper Financial provides hard money financing for individuals and businesses in Massachusetts. Keep reading to learn more.
Types of alternative mortgages
Common bank mortgages don’t always provide the financing that you need when you need it. Real estate private money lenders offer alternative loan options like these.
Bridge loans are typical in business, used to provide companies with a short-term influx of cash. Homeowners seek them out when they want to purchase a new home before their current property sells. There are two common types of bridge loans:
Borrow an amount between your current mortgage balance and 80% of your home’s value and apply the financing to a down payment while keeping your home’s mortgage until it sells.
Borrow up to 80% of your home’s value, pay off the existing mortgage and apply the rest to your new home’s down payment.
The main benefit of bridge loans is they allow you to make an offer on a new property without a contingency because you’re not waiting for your current property to sell. In seller’s markets with competition for properties, an offer without a contingency can set you apart from the crowd.
If you’re facing foreclosure, it can feel as though you don’t have options, but loan workout plans can save your credit and put you back on track to a mortgage in good standing.
Lenders work with homeowners to discover why they’ve fallen behind on payments and negotiate the loan terms. The goal is for borrowers to make minimum payments on the new loan. Workouts may:
Add past-due payments to the balance of the loan
Move an adjustable-rate loan to a fixed-rate loan
Extend the duration of the loan, so borrowers have more time to pay it off
The lender will also establish whether changing the loan product will enable the borrower to continue making payments.
Partner buyouts arise for all kinds of reasons, both tense and amicable. However, when real estate is involved in the partnership, it can exacerbate splitting the company. Instead of establishing a long-term repayment plan with the partner, a buyout loan streamlines and speeds up the process for both individuals.
A hard money loan is more accessible than a bank loan, can be used to make improvements to the real estate, and puts the investment in your sole control.
Traditional mortgage approval is contingent on the quality and condition of the property. Banks want safe, solid investments. A conventional mortgage isn’t the right fit for flipping homes or rehabbing old structures.
Hard money financing covers both the cost of the property and the renovation. Rehab loan approval is like traditional funding, requiring a minimum credit score, maximum debt-to-income ratio, and stable income. The issuing of the money is a little different:
Repairs must begin within 30 days and end within six months.
Borrowers can pay contractors 50% within 15 days of closing and the rest upon completion of work.
After the completion of repairs, any remaining funds go to the loan’s principal balance.
For older properties, great locations, and even homes that need basic cosmetic repairs, rehab financing makes it easy to create your dream home.
Get custom loans from Harper Financial in Massachusetts––the trusted private money lenders for real estate.
We get to know our clients and their goals to customize a private money loan optimized to their needs. In addition, our real estate private money lender team keeps a profitable exit strategy for borrowers in mind with every loan.