Advantages of Hard Money Loans

Many savvy investors often ask how hard money loans are used most effectively. In other words, what makes a hard money loan the best option vs. traditional bank financing?

What is the difference between a traditional bank loan and a hard money loan?

Commercial banks focus on two main things: your credit and your ability to make monthly payments based on income. They will scrutinize every point on your credit report, and a history with bankruptcy can undermine your chances of receiving financing. Our team can underwrite a transaction while incorporating your full financial picture. We offer more flexible and creative solutions than a bank can. 

How fast can you fund a hard money loans vs. a bank?

Hard money lending allows the borrower to close quickly. With a traditional bank loan, you are required to jump through several hoops, which means your project then depends on the bank's lengthy time frame – not yours. This process can take anywhere from one to several months. We know you may not have that amount of time – you found a property and you want to close on the loan as soon as possible. We can underwrite a transaction in hours, send you a term sheet the same day, and fund a transaction in 5 business days. We take great pride in our speed and efficiency.

What matters the most from the lender's perspective?

The borrower's credit isn’t as important as the quality of the deal. Numbers matter but not your FICO score.

  1. We require a first position mortgage or deed of trust.
  2. Loan to value ratios are usually 65% of appraised after-repair value.
  3. Loans cover the cost of acquisition and repairs.
  4. Renovation funds are not usually distributed at closing. Draws are made upon completion of work.
  5. The investor will need “Skin in the game” – meaning the investor is required to bring a minimum percentage or dollar amount to the closing table, typically 20%.
  6. Loans are typically short-term which is a good thing because interest rates are higher than rates for owner occupant, traditional loans. Loan terms can have maturities from 3 to 24 months.
  7. Some asset-based lenders offer longer-term loans for landlords with rates more favorable for buy and hold income properties.
  8. Loan proceeds can be used for a variety of real estate related activities. Potentials uses of funds include acquisition and improvements, pre-construction; some also offer refinances (rate/term & cash-out), recapitalizations, consolidations, repositions, partner buyouts and other opportunistic situations.

Great Jones Capital funds non-owner occupied residential, industrial, multi-family, mixed-use, warehouse, office, retail, hotel and industrial. Do your homework and make sure our funding model meets your needs.