Mortgages and hard money

2 Replies

I'm curious to know. If you have a property that is under a mortgage, is it possible to get a hard money loan on top of the mortgage to make some renovations to the property ? I don't know if it varies with different states but I'm in Philadelphia, PA. Thank you

Speak to local lenders to find programs available for your situation. You might be eligible for a HELOC.

Typically a HM loan is done when a conventional lender wont and\or when the ARV allows you to roll in repair costs. HM lenders have programs that lend 70% or 75% on the ARV. On a conventional normally they wont roll in repairs so we end up with additional out of pocket costs.

Consider a property with 100K ARV and a purchase price of 50K. A HM lender will loan you 70K. You would buy the property and have draws on the remaining funds to pay the contractors. Once completed you would refi with a conventional loan at 75% LTV or 75K. Using HM you could potentially be out of pocket with 0 costs with the right deal.

HM does have its own fees. What out for back end points, inspection and draw fees. If done incorrectly you could be stuck in HM with a much higher rate. Holding costs are something that can kill profits quickly. I know of one investor that didn't do as originally planned and the ARV at the refi came in low.

Hard money lenders rarely, if ever, lend in second position. Your best bet is a LOC or something from a bank. Those are tough to get for investment properties. If you're looking for the name of a lender you will need to post in the Marketplace.

You're not going to get 100% of the value of the property.  Maybe 80%, maybe a bit less than that.  So, if you have a property worth $100K with an existing $80K mortgage you're probably not going to find a lender who will allow you to use that as collateral.  Even though you have $20K equity on paper, selling will eat up almost half of that.  If the value drops 10% you no longer have any real equity.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.