Refinance a hard money loan

24 Replies

Just wondering, is it possible to refinance a hard money loan? If so, what institutions would do so. I have read that hard money is not a long term finance strategy, so what is the next step once time runs out?

I'm interested in this topic as well. 

I've actually spoken with a hard money lender who claims he would be able finance a property long term (25 yrs w/ 5yr ARM) but I'd like to be able to refi after 5 if possible.

Yes you can refinance Hard Money into another Hard Money Loan or conventional/conforming if you qualify for that.  Hard Money loans generally are from a 1 year to a 5 year term.  We offer Owner Occupied Hard Money financing (California only) with a 15 year term.

Hard Money is generally used for a) short term financing a flip property or b) financing for a property if you don't qualify for conventional or conforming financing and once you then qual for it you refinance.  Such as when your credit is bad, need more time on your income to qual with a bank, etc.

Hope that helps.

Best, Ken

I really am looking into a hard money loan because I found someone who does 100% financing. My credit is not an issue but would a regular bank or credit union be willing to take on the task? Most people I have talked to said to me that it's much harder to get into the game with no starting money.

Originally posted by @Eric Bousquet :

I'm interested in this topic as well. 

I've actually spoken with a hard money lender who claims he would be able finance a property long term (25 yrs w/ 5yr ARM) but I'd like to be able to refi after 5 if possible.

 Shouldn't you be able to refinance after one year? You could beat some of that high interest, at least I've read books that say you are eligible for refinance after one year.

Yes, presuming your ARV supports 75% equity after your rehab, most lenders will refinance the property.

Originally posted by @Chris Severin:
Originally posted by @Eric Bousquet:

I'm interested in this topic as well. 

I've actually spoken with a hard money lender who claims he would be able finance a property long term (25 yrs w/ 5yr ARM) but I'd like to be able to refi after 5 if possible.

 Shouldn't you be able to refinance after one year? You could beat some of that high interest, at least I've read books that say you are eligible for refinance after one year. I wouldn't wait that long if I disrupt have to.

Originally posted by @Chris Severin:
Originally posted by @Chris Severin:
Originally posted by @Eric Bousquet:

I'm interested in this topic as well. 

I've actually spoken with a hard money lender who claims he would be able finance a property long term (25 yrs w/ 5yr ARM) but I'd like to be able to refi after 5 if possible.

 Shouldn't you be able to refinance after one year? You could beat some of that high interest, at least I've read books that say you are eligible for refinance after one year. I wouldn't wait that long didn't have to.

Originally posted by @Chris Severin:
Originally posted by @Chris Severin:
Originally posted by @Chris Severin:
Originally posted by @Eric Bousquet:

I'm interested in this topic as well. 

I've actually spoken with a hard money lender who claims he would be able finance a property long term (25 yrs w/ 5yr ARM) but I'd like to be able to refi after 5 if possible.

 Shouldn't you be able to refinance after one year? You could beat some of that high interest, at least I've read books that say you are eligible for refinance after one year. I wouldn't wait that long if I didn't have to.

sorry the text editor messed up some of my post.

Doing the refinance won't be any issue provided you qualify.   Depending on your situation, you may be able to get 30 year fixed rate conventional loans.  If not, then a loan from a portfolio lender is possible, too.

What you may have an issue with is value.  If you want to do this quickly, the "value" the new lender uses may be the price you paid.  Some might let you add in documented rehab costs (i.e., not your labor).  That may mean you have to do a cash-in refi.  I've been there.  If you want to use a new appraisal, many lenders will have a "seasoning requirement" that makes you wait until you've owned it six months or a year.  Lending is loosening, though, so you might find a lender who will let you use a new appraisal more quickly.

It is going to be very hard to find anyone that will give you anywhere near 100% LTV. That is very high.

Refinancing Hard Money Loans is completely doable. But yes, 100% financing is very difficult. I would start working with a conventional mortgage broker now and tell them what you want to do. The refinancing/paying off of the hard money loan is the easy part. All HML will want to get their money back, they are short term loans. Just make sure you know your loan's requirements on prepayment penalties. Good luck!

@Chris Severin

Pretty sure @Chris Severin is talking about a 100% loan on the hard money.  That is possible if you have the right lender and the right deal.  Then, if you add enough value and wait out the seasoning requirements, you might be able to refinance into a long term loan with little or none of your own cash.   You really have to have the right lender and the right deal, but this is at least theoretically possible.

Yes i am in fact speaking of the hard money loan. Here's another question: what would typical terms be on a hard money loan? I am looking to get 300k for a deal. What could possible payment terms be?

Varies with the lender.  The guy I work with charges four points and 15%.  So you would get $288K out of that $300K loan and would have monthly payments of $3750.  Interest only.

Originally posted by @Chris Severin :
Originally posted by @Eric Bousquet:

I'm interested in this topic as well. 

I've actually spoken with a hard money lender who claims he would be able finance a property long term (25 yrs w/ 5yr ARM) but I'd like to be able to refi after 5 if possible.

 Shouldn't you be able to refinance after one year? You could beat some of that high interest, at least I've read books that say you are eligible for refinance after one year.

I'm sure I could logistically. But my issue is being self employed. 

I'd hope that when the property is finished and re-appraised the equity would be at 40%.

I've never refinanced a property before and the 5 yr ARM gives me the time to sort out the possibilities of a conventional loan. At least that's my plan. :)

@Eric Bousquet  

And 

@Chris Severin

You can refinance a hard money loan after 6 months from closing. It would go based on appraised value at that point...... Depending on how many properties you have and if it is a SFR or a MFR you are looking at, at least 75% LTV to refinance into conventional. I would definitely make sure you are pre-qualified if you are purchasing that high price range if a property. As Jon said HML are typically 12-16% with 2-4 points down...... It can sick up a lot of your profit quickly if you are not careful. If the LTV is there you also need the proof of income that you can pay back the conventional mortgage.

Can you refinance - it depends. 

If you're looking to buy something that doesn't qualify for financing due to repairs, but your credit/debt to income is good, then you can acquire the property via HML, repair it, and then obtain FHA or Conventional loan with 96.5% or 95% LTV provided it is your primary residence. An investment property would be 75% LTV on a Fannie/Freddie conventional loan.

If your credit and debt to income is not good, and that's the reason you're using HML to acquire, then you won't be able to refi until your criteria matches that of the lender's requirement.

Some HML will have relationships with long term lenders who can switch you over during the process if possible.

Originally posted by @Brooks Rembert :

Yes, presuming your ARV supports 75% equity after your rehab, most lenders will refinance the property.

With non owner properties you can technically do a rate/term refinance up to 80% if you own 1-4 financed properties (SFR - single family residence) so its not necessarily true and depends on the circumstance of the borrower.

I've had investors who acquired as non owner then decided after the rehab that they like the property so much that they ended up occupying the property as a primary in which case as a primary I can refinance up to 95-97% of loan to value (LTV) based on the new market value (did not need to wait 6 months because it was not a cash out refi, but rather a rate/term).

Originally posted by @Mark Gallagher :

Can you refinance - it depends. 

If you're looking to buy something that doesn't qualify for financing due to repairs, but your credit/debt to income is good, then you can acquire the property via HML, repair it, and then obtain FHA or Conventional loan with 96.5% or 95% LTV provided it is your primary residence. An investment property would be 75% LTV on a Fannie/Freddie conventional loan.

If your credit and debt to income is not good, and that's the reason you're using HML to acquire, then you won't be able to refi until your criteria matches that of the lender's requirement.

Some HML will have relationships with long term lenders who can switch you over during the process if possible.

Thats good you mentioned it Mark, about the HML to Conventional programs that "take out," the HML. The lenders who have relationships with HML brokers tend to call them two step programs or bridge to perm.

It could really eliminate a lot of the risk for investors knowing that they have the perm financing already secured to take out the bridge money if certain conditions are met as opposed to winging it near the end of the HML's term.

Originally posted by @Neil Aggarwal :

It is going to be very hard to find anyone that will give you anywhere near 100% LTV. That is very high.

100% LTV is relative isnt it? Relative to the value you're either buying at "loan to cost," LTC or 100% of project up to 65-70% ARV -after repair/improvement value which some HML's will do if you have you a proven track record or have front line experience.

Conventional financing is a bit different and you can get up to 105% combined loan to value sometimes with community assisted second's and other bond/state programs but with private/HML it varies.


Originally posted by @Chris Severin :

Just wondering, is it possible to refinance a hard money loan? If so, what institutions would do so. I have read that hard money is not a long term finance strategy, so what is the next step once time runs out?

 lol @ what happens when time runs out.. usually you would need to have a clear exit strategy before going in and for some, it is to have the property sold "ASAP".

This is something I was interested in as well. Would it be easier to switch to a conventional loan if you have proof showing you are receiving a monthly income from a rental property as opposed to a property that you are just refinancing to fix and flip?

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