Hard Money Lenders Connecticut: Alternative Financing Options
When securing financing for real estate projects in Connecticut, hard money loans offer an atypical solution. Whether you’re flipping homes in the Nutmeg State or investing in rental properties along the scenic coastline, knowing the ins and outs of how hard money lenders operate can be essential for your success. Unlike traditional loans, these short-term, asset-based loans provide faster funding, which can be a significant advantage in a competitive market.
Hard money loans are best for those needing quick cash without the stringent credit checks of conventional mortgages. However, the ease and speed of obtaining these loans come with higher costs and risks.
This guide will help you understand the ins and outs of hard money lending, ensuring you make informed decisions for your real estate investments in Connecticut.
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 provides short-term loans secured by real estate, typically used by house flippers and investors. These lenders focus on the property’s after-repair value (ARV), which is the estimated value after renovations are complete. ARV helps determine the loan amount, usually a percentage of this value, giving investors the funds needed for purchase and repairs.
Clients of hard money lenders often include rental property investors and those unable to qualify for traditional loans. The interest rates and fees for hard money loans are higher due to the increased risk, with interest rates typically ranging from 8% to 15%. If a borrower fails to repay, the lender can foreclose on the property, making these loans a serious commitment.
Additional costs can include origination fees, closing costs, and points, which are a percentage of the loan amount paid upfront.
How does a hard money loan work?
If you’re a real estate investor looking for a financing option that provides speed and flexibility, connecting with hard money lenders in Connecticut could be beneficial. Here’s a quick rundown of how hard money loans work:
