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Hard Money Lending and Down Payments

Real estate investors often seek the highest possible level of financing on a target property so they can retain liquid cash flow for improvements and business operations. Most private money lenders San Diego require a down payment for hard money loan approval. Hard money lenders use the property as collateral for the loan. If you do not pay the loan as agreed, the company can seize and sell the real estate to make up some of its loss. Without a down payment, the lender could end up with a property worth much less than the loan amount. Review the common requirements before you apply for this type of loan.

Hard Money Loan Down Payment Amounts

Depending on the lender, your credit history, the property value, and other factors, a hard money loan typically requires a down payment ranging from 10 to 50% of the real estate value. For example, if you plan to buy and improve a piece of land on the market for $100,000, you will need a down payment of $10,000 to $50,000 to get financing from a private money lenders.

Some buyers may qualify for a no-down-payment double bridge loan. With this arrangement, you get a temporary loan to cover the cost of buying a new property before you sell one of the existing homes in your inventory. Most bridge loans require a 70% down payment. In this case, a second bridge loan would provide the 30% down payment. In most cases, eligible investors demonstrate the ability to secure long-term financing for the property within 36 months.

Understanding Hard Money Loans

Hard money, or private money, is an umbrella term for any funding that does not come from a traditional bank or credit union. Private investors and organizations put up money for these loans in exchange for interest. You can rely on a hard money loan if you cannot get funding for an uninhabitable investment property, have poor credit but can provide a solid down payment, or need financing right away to close a deal successfully.

Various types of hard money loans give real estate investors the short-term funding they need for operational liquidity. Most hard money loans have interest rates ranging from 8 to 11% in exchange for their convenience and increased level of lender risk. Unlike conventional mortgages, these loans do not require an extensive underwriting process or detailed regulatory adherence.

Common subtypes of hard money loans include bridge loans as described above, loans specifically to rehabilitate distressed properties, loans to cover the cost of real estate stuck in a trust or delayed probate process, estate loans, loans to take cash out and refinance another mortgage, fix-and-flip loans, and straightforward real estate purchase loans.

At North Shore Financial, we’ve spent four decades becoming the premier hard money lenders Los Angeles CA and beyond. We can help you secure asset-based private money loans for a range of property types, including residential, industrial and commercial properties and tracts of open land. Qualifying investors can obtain approval and funding within just a few days, compared to up to 45 days for traditional real estate funding. Get in touch with us today to get started on your next big project.

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