If you are thinking about going with a hard money loan, you need to be familiar with the different options available to you. If you work with a conventional lender, you probably won’t have a lot of choices, as they will present you with a loan package and ask you to sign it. One of the major advantages of working with a hard money lender is that you can open the door to a variety of different loan types that could be right for your needs.
Of course, you need to figure out what option is best for your needs, and that is why you need to familiarize yourself with a variety of loan types that could be right for your specific situation.
1. A Bridge Loan
One of the most common types of loans that hard money lenders provide is called a bridge loan. This is a loan that is specifically designed to help you bridge the gap between the purchase of one property and the sale of another property. For example, if you see a property that you want to purchase as quickly as possible, you might not have the cash to do so because you already own another property. You might not be able to afford to sell your current property before you purchase the next one, and that is where a bridge loan could be beneficial. You will be expected to pay back this loan in approximately 1 year.
2. Flip and Flip Loan
Another type of loan that could be right for you is called a fix-and-flip loan. This is one of the most common types of loans that real estate investors get because they are perfect for purchasing distressed properties that require a lot of repairs and renovations. If you are thinking about selling the property quickly for a profit, then a fix-and-flip loan could be right for your needs. You will be expected to pay back the loan in approximately one year, and the loan is secured by the property you purchase. If you are interested in this type of loan, you should expect to be asked for a down payment of between 20 and 30 percent.
3. A Construction Loan
The next option you might have available is called a construction loan. This type of loan is used to finance new construction that is taking place on your land. You can also use this type of loan to finance the renovation of a property that you have recently purchased. This is another short-term loan, as the goal will be to sell the property as soon as the construction project is done or as soon as you are done with the renovation project. Then, once you sell the property, you will use the proceeds from the sale of that property to pay back this loan. This is another loan that will require a down payment of approximately 20 to 30 percent, and you will be expected to pay back this loan in approximately one year.
4. Cash-Out Refinance
You may have also heard about a cash-out refinance. The goal of this type of loan is to tap into the equity you have on a property that you own. You will take out a loan against the equity that you have, and you can use the cash available to finance a new project. For example, if you see an investment opportunity, you might need a quick source of cash to purchase that property, and you can tap into the cash that you have via the equity in your home. You will have more opportunities for flexibility with this type of loan, and you may decide to pay it back over five years.
5. Owner-Occupied Loans
You may also want to consider an owner-occupied loan, which is typically used for a primary residence. This could be an option offered by a hard money lender when a traditional bank loan is not an option. This is another short-term loan, as you will be expected to pay back the loan in less than a year. It also requires a larger down payment, as you will be expected to put down approximately 20 to 30 percent. The loan itself is going to be secured by the property you are purchasing.
6. Land Loans
A land loan is very similar to a construction loan, as you will take out the snow and if you plan on developing land you are purchasing. You will use this loan to purchase land, and the land might not have any structure on it at all. Then, after you purchase the land, you will put a construction project on the land, and you will sell the property for a profit.
Ideally, you should plan on repaying the balance of your land loan as soon as the construction process is done and the property is sold. Therefore, you should be expected to pay back the loan in approximately one year, but you may decide to change the terms of the loan if you feel like the construction project is going to take longer. This is another type of loan that will require you to supply a 20 to 30 percent down payment.
Contact Barrett Financial Group for Help With Your Next Hard Money Loan in AZ
There are plenty of loan options available, and you need to work with the right hard money lender in Arizona to help you. We are Barrett Financial Group, and we have a variety of loan options that could be right for your needs. We understand the right loan type for one person might not necessarily be the right loan type for somebody else, and we can review the features and benefits of each option before you make a decision. If you would like to learn more about how we can help you with your upcoming transaction, give us a call today to speak to a member of our team.
