Although there was once a time when hard money loans were associated with the lower end of the housing market, today that is changing. In a bid to seize on impressive Returns on Investment (ROIs) of luxury properties, an increasing number of luxury property developers are choosing private money loans.
If you’re looking into alternative means of finance, you may opt for a hard money luxury home loan for a variety of reasons. Whether you’re attracted to the rapid turnaround times or your credit score is letting you down, there are plenty of reasons to wander down the private lending route.
What is a hard money luxury home loan?
While the price of the home that’s caught your attention plays a role, other factors contribute to its luxury status. For example, if you’re searching for property in a coveted area, the chances are it’ll gather significant value as years go on. Additionally, yours may come with high-end facilities, such as theaters and arcade rooms. A luxury house usually features top-notch building materials too, allowing them to stand the tests of time. Think of granite countertops, raw stone feature walls, and beautiful wood paneling.
More often than not, a luxury home will command the type of mortgage that financiers refer to as a ‘jumbo mortgage.’ In other words, they’re worth more than $422,500. Gaining access to such mortgages, especially when you have an existing property, becomes incredibly difficult when you aren’t able to provide a substantial deposit. If you’re short on cash and your credit score is less than ideal, your proposed investment could soon slip through your fingers.
That’s where hard money acquisition loans come in. Depending on the person or organization financing your investment, you could finance up to 75% of your current property’s value. Alternatively, some lenders may provide up to 75% of the proposed property’s value, but only when you have an independent source verifying that your investment dreams and predictions are realistic.
When would you need a private money luxury home loan?
We’ve touched on some of the reasons, but let’s explore the in-depth if this avenue will work well for you. Traditional acquisition loans usually go to those with excellent credit. Banks like to exercise caution, which means they’re picky even when an investment idea is judged as being realistic. When this happens, a broker could help you find a private money luxury home loan from a trust deed investor or investment fund, credit union, or another small organization.
In general, hard money and private money loans carry higher interest rates. They range between 7% and 18%, with numerous factors influencing the final figure. But, you can repay them faster and they often don’t carry early repayment penalties. Those benefits make private money loans advantageous if you’re planning to purchase the luxury property, make some quick changes, and then resell for a tidy profit. In such instances, you’ll usually need a fast financial turnaround. Thanks to the lack of personal financial inquiry, these loans are usually granted faster than standard ones, allowing you to swiftly move forward with your investment plans. Some people are able to access their cash in as little as one to three weeks.
What’s the best way to get a hard money luxury home loan?
Choosing a hard money luxury home loan means you’re opening yourself up to several financial avenues. But, you need to know where they are, whether they’re likely to lend to you, and whether they’re the best resource available. As such, it’s more than advisable to use a private money broker to secure a private money loan. In addition to having the financial acumen needed to determine whether a financing plan is right for you, they have enough connections to get your money fast.
It’s also worth noting that private money loan brokers usually have great connections when it comes to finding non-qualified mortgages for owner-occupied and non-owner-occupied properties. Once you start working with one, you can access finance on more convenient terms.
If the quick nature of a private money luxury home loan appeals to you, First Capital Trust Deeds can help you explore your options.