How to Refinance a Hard Money Loan: Tips for Investors
People use hard money loans for several reasons. They’re great for fix-and-flip projects, investment properties, or even commercial properties. However, with shorter loan terms and higher interest rates, there comes a time when you’ll want to refinance. If you want to learn more about how to refinance a hard money loan, read along as we go over everything you need to know.
Contents of This Article:
- Why Refinance a Hard Money Loan?
- How to Refinance a Hard Money Loan
- Qualifications to Refinance a Hard Money Loan
- Benefits of Refinancing Your Hard Money Loan
- Find a Local Hard Money Lender Near You
Why Refinance a Hard Money Loan?
There are plenty of reasons to refinance a hard money loan, whether you change your mind on a fix-and-flip project or need more time to pay off your investment. After all, most Maryland fix-and-flip loans give you time to complete a project within a year or two.
Ultimately, hard money loans are great for investors that don’t qualify for traditional lending but need capital quickly. However, most hard money loans have shorter terms, usually 1 to 3 years. As such, you have little time to pay it off unless you refinance.
Refinancing your hard money loan can give you more time to sell your property or more funding to complete a fix and flip project. That said, if you’re looking to refinance a hard money loan, it’s important to know your options. Let’s go over how to refinance a hard money loan and the different loan options to choose from.
How to Refinance a Hard Money Loan
There are a few different ways to refinance your hard money loan, depending on your goals and financial status. For instance, you can refinance your current loan with another hard money loan or look for a long-term option, like a conventional mortgage loan.
Some borrowers choose a long-term financing option, like a traditional loan. However, there are plenty of instances where a hard money loan makes more sense. For instance, where you may consider refinancing your current hard money loan with a new one if you:
- Don’t qualify for traditional financing
- Need more time or funding for your fix-and-flip project
- Want to adjust your interest rate or loan term
- Aren’t ready to sell your investment property yet
- Need to refinance quickly and don’t have time to wait for a conventional mortgage loan
On the other hand, some investors find it more challenging to refinance a hard money loan with a conventional bank loan. After all, you need to meet all of the typical requirements, like a good credit score, significant down payment, and income requirements. Next, let’s go over the qualifications to refinance a hard money loan with another short-term loan.
Qualifications to Refinance a Hard Money Loan
Depending on what type of loan you choose to refinance with, the qualifications may differ. However, we’re going to go over the financial and property requirements you need to refinance with a hard money loan.
Unlike the extensive requirements you need to refinance with a conventional loan, the financial requirements for a hard money loan are less intense. While some lenders may want to verify your income and credit history, it doesn’t determine whether or not you get a hard money loan.
To refinance your hard money loan, lenders may need certain documentation regarding the property and your finances. For example, you’ll need to provide tax returns, your driver’s license, a copy of the sales contract, and financial statements to prove your income. However, they’re most concerned with the investment property and your plans to renovate or fix and flip it for profit.
To refinance your current loan with a hard money loan, your property will need to meet the requirements as well. After all, with your property as collateral, lenders will want to see that it makes sense for a short-term loan. As such, most hard money lenders want to see your investment plan to determine a loan amount and new terms.
For instance, you’ll need to have a solid plan for your property. If you’re refinancing, lenders may want to see your updated plan, progress, and updated exit strategy. For example, lenders may ask to see a detailed list of proposed repairs, cost of building materials, labor costs, and copies of contractor estimates. Additionally, they’ll want to inspect the property to ensure there are no issues and it makes sense for a new hard money loan.
Benefits of Refinancing Your Hard Money Loan
Hard money loans are short-term loans that give you enough time to fix and flip properties without worrying about a 30-year repayment term. However, sometimes 1 to 3 years isn’t enough time to complete the repairs and improvements you want. That said, here are some of the main benefits of refinancing your hard money loan with a new loan term.
- Allows More Time to Pay Off Your Investment- One of the main reasons investors refinance a hard money loan is if they need more time or financing to pay it off. Refinancing your hard money loan with an updated plan and strategy can give you more time to complete repairs and pay off the property.
- You Can Adjust Your Current Interest Rate- If you originally got your hard money loan with a higher interest rate, you could adjust your rate when you refinance. Additionally, you could get a shorter or longer loan term, depending on your investment plan and goals.
- It’s Quick and Simple- If you choose to refinance your current hard money loan with a new one, it’s much quicker and more straightforward than applying for a traditional loan.
Find a Local Hard Money Lender Near You
If you’re looking for a new loan or want to know how to refinance a hard money loan, you’ll want to find a local lender. Finding a lender near you can help you fund your real estate investment in as little as 48 hours. Luckily, Maryland Hard Money Lenders has the experience and expertise to make the process quick and easy.
Maryland Hard Money Lenders offer several different loan types, depending on your investment goals. Whether you’re looking for a residential hard money loan, a fix-and-flip loan, a new construction loan, or bridge financing, we’ve got you covered. Contact Maryland Hard Money Lenders today to learn more about our loan services.