How lending works?

[Anthony Theokary]

Hi. I bought a property recently in South Philly. I need about 60k from a lender to put on a 3rd story addition along with the rest of the house being a total gut. (I have some funds also). 
I don’t exactly know how hard money works or what other options I may have. Can someone explain this to me please?

[David Ramirez]

I'm assuming you bought the house in cash, so you could get hard money on only the rehab part. Hard money loans are short-term loans with high-interest rates and fees upfront. You usually pay only interest during the loan period and the avg loan duration is a year. 

[Anthony Theokary]

I bought the house on a conventual loan with 10 percent down.

[Dave Skow]

@Anthony Theokary- is the  home your primary home or a rental ?   if primary - talk  to your lender  about a  remodel/ rehab loan .

[Anthony Theokary]

It’s a primary: already asked him. He said it would’ve had to be done when I purchased the home.

[Eliott Elias]

If the property is paid off you can use the property itself as collateral to borrow the 60k if it has a good ARV.

[Albert Bui]

Quote from @Anthony Theokary:

Hi. I bought a property recently in South Philly. I need about 60k from a lender to put on a 3rd story addition along with the rest of the house being a total gut. (I have some funds also). 
I don’t exactly know how hard money works or what other options I may have. Can someone explain this to me please?

 If you bought your house ( the subject property in the post above) with 10% down then your current loan to cost or LTC is 90% (the difference between your price and your down payment).

Can you get more money out of this property? probably not because hard money lenders or HML will not lend above 90% LTC or to properties that are "owner occupied."

If you had other properties or 401k's, savings, lines against your stocks or SBLOC's securities backed lines of credit, or IBLOC - insurance (life perm) backed lines of credit, you could use these or get other lines/loans against other real estate.

If you're living in this subject property above then you wont be able to get HML or commercial options against it either because most HML lenders shy away from owner occupied properties. The kiss of death for them is if you say "im living here," well you mind as well get a community bank construction lender who will lend to primary occupants.

To get a loan on future value or construction after repair value you'll need a local community bank but this will most likely be a full doc (Debt to income ratio) income qualified loan.

Those are your options above pretty much. 

Let me know if you need to break any of those terms down.

@Matthew Kwan

@Carlos Valencia

[Albert Bui]

Quote from @Anthony Theokary:

It’s a primary: already asked him. He said it would’ve had to be done when I purchased the home.

yeah just ABC's of structuring and the importance of planning out the deal ahead of time. Now that you've already closed and declared primary with a conventional loan on the trust deed/mortgage it will state "an occupancy agreement affidavit" so lenders looking at this property now know you declared primary occupancy going into this purchase. Plus the fact you have a conventional 90% LTV loan they'll know its a primary occ or atleast second home financing (because of the LTV and fannie/freddie mac guidelines).

@Matthew Kwan

@Carlos Valencia

[Sasha Mohammed]

your best bet IMO at this point is to see about private money. IE: friend or family member that might be willing to loan you the cash. 90% LTV/ LTC is on the higher end, and really only happens in a few cases: owner occupied, or rehab lending (non owner occ). you could try to refi it now into a rehab loan, but chances are there wouldn't be much you can squeeze out of it. And as @Albert Bui mentioned, new lender would likely heavily scrutinize your intentions as the original note would indicate you intend/ intended to live there. You'd really have to prove to them that you didn't move in, and why you initially told the first lender you planned to (this could be considered occupancy fraud). Tread lightly, or look for outside monies. 

[Dave Skow]

@Anthony Theokary- you can ask a lender to do a cash out refinance on the property ...most lenders will lend up to 75% loan to value of the present property value ......if you own a home - you can consider a cash out refinance or a 2nd mtg / HELOC on this home .....other possible sources for the 60K are 401K loan / family loan / savings /