Hard Money Lenders Chicago: Top Choices and Alternative Financing Options
Considering a real estate investment in Chicago? Hard money loans might be a worthwhile financing option to explore. Whether you’re planning to flip a historic greystone in Lincoln Park or invest in a rental property in Logan Square, hard money lenders in Chicago can offer faster approval times and more flexibility compared to traditional bank loans. They can be especially helpful for investors facing tight deadlines, limited funds, or credit challenges.
If you’re not a seasoned real estate investor and simply need cash to keep yourself afloat between buying and selling a home, we’ll discuss several alternatives to make use of your home’s equity. We’ll also go over the fundamentals of hard money lending in Chicago to help you decide whether this financial tool aligns with your real estate investment or home-buying needs.
Editor’s note: This post is for educational purposes and is not intended to be construed as financial advice. HomeLight always encourages you to consult your own advisor.
What is a hard money lender?
A hard money lender is a private individual or company that provides short-term loans secured by real estate. Unlike traditional lenders, who emphasize the borrower’s creditworthiness and income, hard money lenders in Chicago focus on the value of the property being used as collateral.
Their loan programs are popular among real estate investors, such as house flippers and those buying rental properties, who need quick access to funds and flexible terms. Hard money lenders use after-repair value (ARV) — the estimated value of a property after renovations and repairs are completed — to determine the loan amount. They typically lend a percentage of the ARV to ensure the investment’s profitability and security.
Hard money loans usually have higher interest rates, ranging from 8% to 15%, and shorter repayment periods, typically between 6 to 24 months. Additional costs include origination fees, closing costs, and points, which are a percentage of the loan amount paid upfront. If a borrower fails to repay a hard money loan, the lender can seize the property to recover their investment.
How does a hard money loan work?
If you’re a real estate investor in Chicago seeking a financing option that offers quick and flexible funding, hard money lenders might be the right fit for you. Here’s an overview of how hard money loans operate in the Windy City:
