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Using Hard Money for Commercial Real Estate Investments

If you need a quick loan to put a down payment on a property, a hard money loan can be a good option. This type of financing is most often used to fund real estate investments. AS the name implies, hard money loans can sometimes be difficult to obtain, but many lenders, including HML Solutions, have begun offering less-stringent criteria for hard money loan eligibility to make them accessible to more people.

What Is a Hard Money Loan?

A hard money loan is a type of creative financing, which is a financial solution in which an investor provides a borrower with a non-traditional loan. Hard money loans are often harder to qualify for because they typically have high interest rates and strict terms for eligibility.

However, because hard money loans require little to no documentation, the borrower receives money from this financial solution almost instantly. This fact makes hard money loans ideal for real estate buyers who need funding for down payments.

What Are the Benefits of Hard Money Loans?

Hard money loans have two primary benefits. The first advantage of this financial solution is flexibility. Because hard money loans come from private parties or investors, the terms for this avenue of financing are flexible. Loans can easily be tailored to meet the individual needs of the borrower, which allows people with less-than-perfect credit histories to qualify for hard money loans.

The second advantage of hard money loans is speed. Instead of having to wait for financing to be approved, you can receive money from a hard money loan in as little as a week. This speed can make a huge difference in getting the property you want when it becomes available or missing out on it because you can’t afford the down payment.

What Should You Look For in a Hard Money Lender?

When applying for a hard money loan, it’s important to find a lender who meets your needs. Consider the following criteria to decide which lender to work with:

  • Loan Terms: The specific terms of a loan, including the specified payback period, have a direct impact on your profit margin over time.
  • Loan Amount: Various lenders offer different loan amounts, so choose a lender with a debt ceiling higher than the amount of the loan you need.
  • Interest Rates: Hard money loans have higher interest rates than other types of financing, but the rates vary among lenders. Choose to work with one that offers lower interest rates.

How Can You Find a Hard Money Lender?

You can find many resources online that list all of the benefits of various hard money lenders. Some of the websites compare lenders from individual states, while others compare lenders from all across the nation. Reputable websites will include all of the information you need to decide when lender is right for you.

Apply For a Hard Money Loan From HML Solutions Today

A hard money loan is a useful type of financing if you need a quick down payment for a real estate property. HML Solutions offers this financial solution with competitive terms, so if you think a hard money solution is the right type of financing for you, contact us today to apply.

Using a Bridge Loan To Buy Your Next Home in South Florida

When you are buying a home, you have a few different options for financing. The most obvious of these is a conventional mortgage with either a fixed or variable rate. However, there are some circumstances in which this may not be the best choice or even possible. In some cases, using a bridge loan is the better option. Understanding this useful form of financing and its benefits will enable you to make well-informed decisions about buying a home in South Florida.

What Is Bridge Lending?

Bridge financing is essentially a type of loan that helps to close the gap between your current financial situation and your next loan. In other words, it is used to help secure long-term financing. It is used for real estate purchases, renovations and refinancing. Additionally, there needs to be real estate as the collateral on the loan.

Typically, in a real estate purchase, bridge financing is used to cover all or part of the costs of a new property while selling your current property. So, if you are moving primary residence, you could use bridge lending to help with the costs of the new home while you sell your current home.

These loans are typically very short and have high interest rates. However, their total cost is more contained than you may expect because of the short payoff time.

How Does Bridge Financing Work?

As mentioned, bridge financing is asset-backed. This means that it is secured against the property you currently own, almost always real estate. For residential real estate deals, this will typically be a loan secured by your home equity.

There are a few ways that it can work. You can use the loan as a way to pay off your current mortgage, allowing you to secure financing for the new property. Alternatively, you can use the loan for a down payment on the new property.

In either case, you will be used your equity in your current home to help make buying the new home possible. Typically, the bridge loan is paid in full once the original property has been sold.

How Do Bridge and Hard Money Loans Differ?

Hard money loans are very similar to bridge financing. In fact, bridge lending is often considered to be a subset of hard money lending. However, there are some key differences.

First, hard money loans are financed by private capital. In other words, they are not offered by banks or other traditional lenders. This allows them to avoid some of the restrictive requirements that banks have to follow. Bridge financing can be funded through private capital but may also be offered by a bank.

Second, hard money lending is more flexible in how you use the money. Conversely, bridge financing is used solely for real estate. Furthermore, while both are short-term loans, bridge lending is particularly intended for situations in which it can “bridge the gap.”

What Are the Benefits of Bridge Financing?

This is a valuable form of financing in many situations. These are a few of the reasons you may consider using bridge lending:

  • Fast: One of the main characteristics of bridge financing is that you can secure a loan quickly. Typically, the turnaround is a couple of weeks. In some cases, it can be just a few days. This means that you can secure the financing you need substantially faster than the months needed to close a traditional mortgage.
  • Avoids the Need for a Contingency Offer: When you use bridge lending to help with your purchase of a second property, you can avoid needing to make a contingent offer. In other words, the seller can be confident that your offer will be moving forward. This can put you at a significant advantage compared to people who need to sell their homes to fund their offers.
  • Helps You Avoid Delays: When you use bridge financing, you can avoid the delay of needing to sell your home. If there is a time-sensitive opportunity available, you can move forward with it. In turn, this can potentially mean saving substantial amounts of money or getting the perfect home due to your fast funding.

How Can Bridge Financing Help With Buying a Home?

There are a few ways that bridge lending can help you with your next home purchase. As mentioned, you can either use the money to pay off your current home mortgage or use it to help with the purchase of your new home directly.

In the case of paying off your current mortgage, you have a few options. You can refinance your current mortgage with some additional money from your home equity (a cash-out refinance). This will allow you to pay the down payment on the mortgage for your new home. Alternatively, you can simply pay off your current mortgage and make the down payment another way. In certain circumstances, this will help you to secure a more favorable mortgage on the new home.

Alternatively, you can use bridge financing to cover the new property. Depending on your home equity situation, you can either borrow a down payment on the new home or potentially buy it outright.

No matter how you use your bridge loan, there is one major upshot: you will be able to secure financing for the new home without selling your current home. For the vast majority of homeowners, getting the down payment to buy a new home requires selling their current home. In turn, this requires a contingency offer on the new home. Since a contingency offer can fall through if you are unable to sell your home, it is less attractive to a seller.

Therefore, using a bridge loan can help you make a more competitive offer. Depending on the market, you could save some money or even just have a chance at getting your offer accepted.

What Are the Alternative Loan Options?

Of course, there are many other options beyond bridge financing that can help you with buying a new home in South Florida. These are the three major options available:

  • Cash Down Payment: If you have some cash on hand, you can make a regular down payment on your new home. Traditionally, lenders have asked for 20% down. However, there are many more flexible options available. In some cases, if you make a smaller down payment, you may find yourself needing to pay for private mortgage insurance, which can increase your monthly payments.
  • Home Equity Line of Credit: If you have some equity in your home, you could use a home equity line of credit to cover your down payment. A HELOC allows you to borrow against the portion of your home that you own. It functions a bit like a credit card in that you can use it for all sorts of reasons, and you have a limit that you can borrow against in whatever amount you need.
  • 80-10-10 Loan: This is sort of line a hybrid between a cash down payment and bridge financing. If you want to secure a loan but don’t have 20% to put down, you could put down 10% and borrow the additional 10%. This is two mortgages (one covering 80% and one covering an additional 10%). You can then pay off the second mortgage when you sell your current home. The difference between this and bridge lending is that the 10% loan is secured against the new home, not the original one.

Should You Take Out a Bridge Loan?

Bridge financing can be a valuable tool for many people trying to buy real estate. It has a lot of benefits, especially for people who want to secure a deal or who aren’t ready to sell their home just yet. However, it also has some drawbacks.

On the one hand, you could potentially save money on your new home. Having a non-contingent offer means that you can usually offer a little less and still be competitive. Additionally, you will be able to move more quickly on opportunities, meaning that you may be able to snatch up a good steal.

Conversely, using bridge financing could mean that you end up paying your original mortgage, the bridge loan and the new mortgage all at once. Plus, due to the short terms, bridge financing tends to carry high monthly payments (although some are designed as interest-only payment models). If you are unable to sell your original home in a timely fashion, this can become an untenable situation.

You will need to carefully evaluate your options. Getting the timing of selling a home and buying a new one to line up properly can be challenging. When things don’t work out, you may end up sinking time and money into a deal that simply falls through. So, consider using bridge financing but make sure you understand how it works.

Get Started With Bridge Lending on South Florida Real Estate

Discover more about bridge loans today. With HML Solutions, you could get the right deal on a bridge loan for your new home in South Florida. Contact us to learn more.

Refinancing an Inheritance Property with a Hard Money Loan

When you inherit a property after a loved one passes away, you become responsible for the mortgage. This can sometimes be problematic if you share the property with one or more co-heirs or do not have the funds to cover the monthly mortgage payment. If you need to refinance an inheritance property for any reason, securing a hard money loan from a reputable lender can help.

Why Might You Need To Refinance an Inheritance Property?

Mortgage loans have a due-on-sale clause that requires the loan to be paid in full before the property can be transferred to another owner. The only exception to this rule is inheritance property; federal regulations prevent lenders from invoking this clause when the property is inherited. 

If you are the co-heir of a property, you and the other beneficiaries must reach an agreement on what to do with the property and who is responsible for paying the mortgage. You must buy out the other co-heirs if you want to have full ownership of the inherited property. You may need a large sum of money up front to buy out any co-heirs, and a hard money loan is a quick financial solution that can be paid back quickly and has flexible terms.

Being the sole heir of an inheritance property makes transferring ownership of the property easier. You may assume the mortgage payments of your late loved one. If you cannot afford the monthly payments, refinancing the mortgage loan can help.

How Can You Refinance an Inheritance Property?

If you need to refinance a late loved one’s property, you must first determine whether you are the lone heir or a co-heir. This information can be found in the will of your late loved one. Use the following steps to refinance the mortgage and then use the money you receive to buy out any co-heirs if necessary:

  1. Add your name to the mortgage deed
  2. Compare refinancing rates with various lenders
  3. Get a home appraisal
  4. Secure a lower monthly mortgage

What Options Do You Have Besides Refinancing an Inheritance Property?

If you cannot reach an agreement for refinancing, you may choose to assume the current payment. You may also ask for a loan modification or rent or sell the property to cover costs.

How Can a Hard Money Loan Help You Refinance an Inheritance Property?

A hard money loan is a quick form of financing with flexible terms. You can secure the money you need quickly to cover a large mortgage payment or buy out co-heirs. Repayment periods are usually short, and hard money lenders are usually willing to work with borrowers who have less-than-perfect credit scores.

When you need to buy out co-heirs to gain full ownership of an inheritance property or need a large sum of money to afford a new mortgage payment if you are the sole heir of an inheritance property, a hard money loan may be the right financial solution for you. HML Solutions offers hard money loans with competitive terms, so if you are interested in securing this financial solution to refinance an inheritance property, contact us today to apply.

Why Real Estate Investors in South Florida Should Use Bridge Loans

The real estate market in South Florida is very active. A favorable confluence of a good economy, great weather, and people from other states moving to the region in droves have contributed to this trend. Real estate investments in South Florida are in vogue and quite lucrative at this time.

Here at HML Solutions, we want to partner with real estate investors. Although the opportunity for profits abounds, it may require a bit of up-front capital to obtain the investment properties that you have in mind. Not everyone has sufficient cash in the bank to purchase a good real estate investment. But, we don’t think that that should deter you.

We believe that bridge loans are one of the best financial vehicles for real estate investors. These are short-term loans, generally with terms of up to 3 years, that are particularly suited for the real estate market. These highly flexible loans are designed to provide quick funding, perfect for a busy real estate market in which properties can move quicker than jackrabbits.

In fact, one of the main benefits of bridge loans is their inherent flexibility. The most commonly are used to facilitate the quick closure of a property purchase. They can also be used for a host of other costs associated with real estate investments. 

We believe that quick-funding bridge loans are better than traditional loans for most real estate investment opportunities. The application process for traditional loans from a bank can take a lot of time and is usually quite intrusive. After the application is finalized, there is a waiting period for approval, after which you may be denied.

Contrast that with bridge loans that provide funding quickly and can be tailored to each investor’s specific purpose and situation. We believe that there really is no comparison.

Sell Then Buy: A Typical Real Estate Technique 

For many real estate transactions, an individual will sell a property that they already own, then use the proceeds to buy the desired investment property that they have in mind. The problem with this approach is that the property being sold may move too slowly to provide the funds to capture the new real estate. Many opportunities are lost because of this.

We believe that loans that “bridge” that typical funding gap make good sense for many real estate investment transactions. A bridge loan provides a clear solution for you to take advantage of these excellent opportunities that you would otherwise be forced to pass on. Our bridge loans offer fast approval and funding, so the seller won’t even know that you need financing to complete the deal. As far as they know, you are flush with cash.

Benefits of Bridge Loans

We believe that you will find a number of hard-to-beat benefits when you obtain a bridge loan from us. Many of these features can be customized to fit hand-in-glove with your personal investment and financial situation. These benefits include, but are not limited to:

  • Loan Structure Options. We offer both fixed-rate and variable-rate bridge loans to the real estate investment community. The best choice for you will be dictated by your personal situation. We can help guide you to the best option. 
  • Low Rates. The interest rates we charge on our bridge loans are highly competitive with other lenders. You can save money with us because of our attractive rate structures. 
  • Interest-Only Loans. We offer interest-only bridge loans. This may be particularly attractive, especially if you expect to pay off the loan in short order, perhaps when the sale of an existing property is expected in a few weeks or months. Interest-only loans do not carry a principal component in the periodic payment schedule, hence they can be much cheaper for the investor taking on the loan.
  • Asset-Based Loans. Our loan programs include asset-based collateralized bridge loans. This may be a preferable option if you have a number of producing properties in your investment portfolio or if your credit history is less than stellar. These types of loans are backed by the value of an existing property rather than by the investor’s ability to pay back the loan by other means.
  • Removal of Contingency. When a home sale contingency is embedded in a purchase contract, the deal may fall through if the buyer is unable to sell an already-owned property first. Our bridge loans can help circumvent the need for such a contingency.
  • Unencumbered Loan Payoff. We do not burden you with prepayment penalties of any sort. If you wish to retire your loan early, feel free to do so without any additional charge. Then, move on to assembling the next piece of your real estate portfolio.
  • Availability to Non-US Investors. We lend to foreign as well as American real estate investors. In particular for foreign investors,  many of whom may not have banking relationships in the United States or an easy way to verify their credentials, our bridge loans are an ideal funding solution. 

Additional Utility of Bridge Loans

Most bridge loans are used to buy properties. There are, however, additional reasons to obtain a bridge loan. Bridge loans could also be used for the following situations:

  • Securing a new tenant
  • Stabilizing the cash flow of the property, or
  • Resolving a short-term issue that affects a property

An example of a short-term, real-estate-related cost that can be addressed by obtaining a bridge loan is an environmental issue with a property that needs mitigation.

Avoid the Traditional Loan Hassle

As we mentioned, applying for and finally obtaining a traditional loan from a bank or credit union can be a burdensome and time-wasting process. A typical scenario, one which you will want to avoid, often follows a course like this:

The loan aspirant contacts a local bank with the desire to obtain a loan for a real estate purchase. He or she is given reams of paperwork to fill out, a credit check to wade through, and then told that the institution will get back to them. The length of time that you wait for a response can seem like an eternity if you are watching other investors attempting to secure the property that you have in mind. In more than a few cases, the institution may deny your application, and you are left high and dry without funding. To make matters worse, your prized property had been snapped up by another investor while you were waiting for approval.

Here at HML Solutions, we want to partner with you, not frustrate your investment goals. Our bridge loan application process is at the other end of the spectrum: it is easy to apply for and a loan decision is made quickly. We believe that the smart decision is to partner with us.

Exit-Strategy Considerations

We find that the clearer your idea on how you plan to pay off your bridge loan, the swifter your approval and funding will be. Our customers generally retire their bridge loans in one of three ways: Payment from the sale of an existing property, payment with funds from other sources, or refinancing with a conventional fixed-rate or cable-rate mortgage.

Be sure to think this through before applying for a loan from us. Depending upon your envisioned exit strategy, we can offer a tailor-made bridge loan that fits perfectly with your expected plan.

National Interest Rate Considerations

Interest rates have been quite low for some time now, making the cost of taking on a loan relatively low. Because of this, the here and now can be an excellent time to take advantage of our bridge loan program. There is no way to know when rates will rise, perhaps considerably. The rise of inflation in recent months does suggest, however, that rates may rise and make the cost of capital more expensive. Regardless of the overall rate environment, when you have your eye on a property, a bridge loan may be the best bet for your funding.

Aspects To Keep In Mind

We would be remiss if we didn’t touch on the following considerations. Bridge loans can be a near-perfect vehicle for many real estate investors because of their flexibility, quick funding, and easy application process. Keep in mind, though, that bridge loans may carry higher interest rates than other types of loans. We believe that this will not deter too many investors, because these loans are generally paid back quickly and the total interest cost can be relatively small. Also, if an investor has other loans or debts, the adding of an additional loan needs to be thought through carefully. 

Closing Summary

Bridge loans can be the ideal solution for short-term funding gaps that commonly arise when real estate investments are under consideration. Here at HML Solutions, we strive to help investors overcome any funding shortfalls that they encounter. If you are looking to purchase residential, industrial, commercial, or land assets, we are here to help. Our bridge loan program provides highly flexible funding with speedy approval and quick arrival of capital.  Don’t let a shortfall of cash thwart your plans. Give us a call today and keep your investment program on a firm footing.

Using Bridge Loans as Gap Financing for Properties in Florida

Florida housing markets are off the charts in terms of investment opportunities. There are incredible properties with gorgeous vistas and coastal charm that buyers are waiting to get their hands on.

Before property investors and real estate businesses can complete the purchase, they need financing. Bridge loans are quickly becoming one of the most popular types of gap financing for this purpose. How can bridge loans help and how do they work?

What Is Gap Financing?

As the name suggests, gap funding refers to financing options that bridge a temporary gap in working capital. It’s a short-term financing method that provides funds quickly and flexibly. Several loan options can fall into this category, including working capital loans and business lines of credit. Bridge loans — also called hard money loans or asset-based financing — are one of the main gap funding options out there.

What Loan Challenges Do Real Estate Businesses and Flippers Face?

The ideal way to buy a property is to apply for a long-term loan with low interest rates. Unfortunately, these traditional mortgages come with a few major drawbacks. They can take a long time to get approved: between several weeks and several months!

Another downside of conventional loans is that they’re not flexible. A loan board has to look carefully at the property you want to buy, give you the OK and determine exactly how much funding will be provided.

For the same reason, it’s nearly impossible to get a traditional loan that covers significant property improvements or remodeling. House flippers that want to purchase a cheap home and turn it into a gorgeous property run into a brick wall with conventional bank loans.

Finally, mortgages only cover a portion of the total purchase price of the property. You always need to have money in savings for a down payment. The amount varies, but it’s common in Florida to need a down payment of 15%–25%. That’s a lot of money for real estate businesses, especially when there are unexpected costs to deal with.

How Can Gap Financing Help With These Challenges?

Bridge loans offer terms that are much more flexible. They let you make decisions quickly and help you maximize the potential of the homes you purchase. Approval for this type of financing is simple, often requiring only basic business information.

House flippers love hard money financing because it adapts completely to project goals. The money you receive is yours to spend however you decide. Did you run across unexpected issues during renovations? You can cover the costs with your bridge loan without needing any special approval.

Gap loans can help you cover purchase costs and remodeling costs. You can get money to hire contractors, subcontractors, electricians, installers and other professionals. You can use funds to buy materials for remodeling.

Even expansion projects and other improvements are on the table. You decide how to use the financing to increase the property’s value the best way possible.

When Are Gap Loans a Smart Idea for Your Real Estate Business?

Gap financing is frequently used in several situations. The way you choose to use it depends on what kind of business goals you have, how many projects you juggle at once and how quickly the current market lets you resell properties.

Bridge loans are a helpful way to supplement available funds. Some real estate businesses have lines of credit that they can use for the majority of the purchase price, but they still need additional capital. If a loan or line of credit has a loan-to-value ratio of 75%, it means the bank only covers 75% of the property’s purchase price. Taking out a bridge loan for gap funding can easily cover the remaining 25% or whatever portion you need assistance with.

Another common situation is when a business wants to buy a property but must wait for approval on a small business loan or mortgage. If the company has been preapproved, there’s a good chance of receiving the loan, but it’s still necessary to wait many weeks or months to know for sure.

What if another buyer swoops in first? With gap financing, the business can get the money to close on the property and then simply transfer the balance to the long-term loan once the financing gets approved.

Real estate businesses and house flippers frequently use gap funding differently. These businesses that have a high volume of home sales can use the profits from completed deals to pay for part of the purchase price for the next acquisition. In that case, it’s easy to use a bridge loan to buy the property right away.

As soon as the previous home sells, the proceeds are used to pay off the bridge loan. This keeps business cash flow and revenue high.

What Are the Advantages of Bridge Loans as Gap Funding?

Gap loans offer pros and cons for real estate businesses. The benefits make them a popular financing tool for many house flippers, property investors and commercial businesses.

Fast Approval and Closing

One incredible difference between bridge loans and traditional loans is their speed of approval. It may only take about a week to get the financing you need to complete a property purchase. That speed makes a huge difference when it comes to real estate.

Sometimes, homes appear at an extremely low price because of bank foreclosures or estate sales. Other times, savvy real estate agents find out about valuable homes before the owners have a chance to put them on the market.

In both cases, having access to a gap loan means you can take advantage of the opportunity. You can make owners an offer they can’t refuse before other buyers have a chance to start a bidding war or snatch a great deal from under your nose.

Stable Business Capital

Real estate businesses and property rehabbers that work on many projects at the same time can benefit from the stability that gap financing offers. In a way, bridge loans are a safety net you can rely on. If you aren’t able to sell a certain property as quickly as you want, you still have money to pay your employees, cover operating expenses, buy remodeling materials and handle other needs.

Working Capital Flexibility

Sometimes, property investors have high net worth but low liquidity. This can especially be the case for property owners who manage a large number of residential and commercial rental properties. The money you make from rent isn’t always enough to cover improvements, remodeling or in-depth repairs. Gap funding can provide an infusion of immediate capital that you can pay off at the end of the month.

Market Possibilities

With bridge financing, it’s possible to take on deals that wouldn’t have been possible before. Some properties in Florida provide a high return-on-investment once sold but come with a large initial purchase price. Wise investors can make the most of the situation, but first, they need the funds to cover these larger-than-normal deals. Gap funding gives you that extra push to complete high-value purchases.

Accessible Credit Requirements

Not all fix-and-flip businesses are large companies with dozens of employees. A major trend in Florida is for married couples to purchase fixer-uppers and generate profits with remodeling and resale. Normally, banks don’t like to provide loans for this type of deal, especially when individuals are just getting started in the industry.

Bridge loans are different. Your business experience or annual revenue aren’t the main factors for approval. Neither are your credit score or credit history. As long as the value of the property covers the gap funding, taxes, insurance and other costs, getting approved is simple.

What Are the Downsides of Gap Financing for Real Estate?

Like any type of financing, there are times when gap funding isn’t the best choice. It all comes down to your project goals and your business finances.

Compared to long-term loans, gap loans have higher interest rates. That’s why property owners looking for long-term investments only use bridge loans to close on properties until they can transfer the balance to a traditional loan. This technique provides the best of both worlds: fast approval and better interest terms.

Bridge loans just aren’t designed to be used as long-term funding. Most only have terms of six months to a year. This means that commercial remodeling projects that are projected to last a long time may not be the best way to use this funding.

Sometimes, bridge loans have additional fees and costs to consider. These costs are easier to absorb for businesses that handle a large volume of real estate transactions. For a single transaction, the fees may eat into your profits. Costs vary by lender, so it’s good to ask questions before signing the financing agreement.

How Can You Decide If Gap Financing Is Right for You?

As we mentioned before, it’s important to consider your specific business goals when deciding if a bridge loan is the solution you need. Gap funding offers countless benefits, but it also has a few downsides. At HML Solutions, our financial advisors can explain more about bridge financing options. Contact us today for assistance.

Is Bridge Financing the Right Option for Your Next Property Investment?

Real estate investment is lucrative, but it requires smart decision-making to succeed. Markets can change quickly, and you need to be able to adapt just as quickly. One of the best things you can do is have a range of financial tools available. That way, it’s easier to select the real estate loan that fits your current business needs and cash flow the best. Is bridge financing from HML Solutions a good option for real estate investing?

What Are Bridge Loans?

Bridge financing involves high-capital, short-term loans that get approved quickly. This type of loan is designed to cover immediate costs ASAP, without the extensive waiting period of traditional mortgages. Bridge loans are also known as swing loans, gap financing, interim financing or asset-based lending.

There are several situations where gap financing can be a great fit for real estate investment businesses:

  • Providing funds immediately while you wait for long-term financing to get approved
  • Giving you money for a down payment on a new property
  • Covering a new mortgage while waiting for another property to sell
  • Financing remodeling, property expansion or other investment property changes

Who Can Use Bridge Financing?

One of the benefits of bridge loans are that they’re accessible for many different entrepreneurs. In reality, even homeowners use gap loans to cover mortgage costs when buying a new home. For investment in real estate, businesses of virtually any type can qualify for bridge financing:

  • Large real estate investment firms
  • Private real estate investors
  • Real estate developers
  • Companies that administer/lease commercial properties
  • Fix-and-flip pros

This type of financing is used by longtime investors and newcomers alike. Qualifying is relatively simple in terms of personal and business credit, so even small real estate businesses can take advantage of it. In fact, even companies with past credit problems can get a bridge loan as long as the chosen property is valuable enough.

What Challenges Are There With Bridge Loans?

Interim financing is a trustworthy option for buying investment property. Like any financial tool, it has pros and cons. There are times when it’s the perfect solution and other times when going with a different loan is the right choice. Knowing the downsides ahead of time can help you make a smart decision on every project.

First of all, it’s important to understand that bridge loans are solely designed as short-term financing. Lenders aren’t going to give you more than 12 months to repay the loan, and honestly you wouldn’t want to extend the financing further than that anyway because of interest.

Any kind of interim financing has higher interest rates than traditional mortgages. They’re not anywhere near credit card rates, but the interest does add up over time. It’s best to use this type of loan when you know you can pay it off quickly, in 6 to 12 months max.

Another thing you need to keep in mind with certain bridge loan options is that you may need equity in the property used as collateral. The amount of equity varies, but it’s usually around 20%. If you do choose to have multiple mortgages going at the same time, you have to qualify individually for both.

What Are the Benefits of Bridge Financing for Property Investment?

The good news is that you can overcome the challenges of bridge loans fairly easily when you use them correctly. After all, a higher interest rate doesn’t generally affect your profit margins when you’re planning on selling the real estate in a few months anyway. You can pay off the mortgage and the bridge loan in a short time with the money you make from the sale.

What are the advantages of this type of financing? There are quite a few benefits compared to conventional mortgages:

  • You can close on the property more quickly: An amazing benefit of gap financing is that it lets you get capital for buying properties very quickly. It may only take 2 weeks from application to closing compared to the 3–5 months of traditional loans. That’s pretty amazing when speed is a determining factor for success.
  • It’s easier to qualify for bridge loans: Approval for asset-based lending revolves more around the property used as collateral than your business’s finances or credit score. Even companies with relatively new or poor scores can use bridge loans.
  • Interim financing lets you work with sellers who don’t want contingent offers: Not all sellers are willing to agree to contingent terms related to selling your existing property. If you run into this obstacle, don’t worry about it. A bridge loan can help you make the purchase right away and still have time for your original property to sell.
  • You have more flexibility to take advantage of deals: In many markets, acting quickly is important if you want to make money from real estate investing. You want to buy low and sell high. This sometimes means having the capital for foreclosure sales or being able to negotiate directly with sellers before they put homes on the market. With bridge loans, you can buy whenever conditions are right.
  • There’s no limit to the property changes you can make: Traditional mortgages generally don’t cover remodeling costs or improvements. They’re not a great fit for most fix-and-flip deals. On the other hand, bridge financing gives you the freedom to make any changes you feel are important for resale value. This includes whole-house remodels, interior changes and exterior additions.
  • Real estate investors can improve their business’s cash flow: Having to wait for one property to sell before you even get started looking for your next project can put a serious damper on your cash flow. It’s better to have the financial freedom to pick up another promising property when you’re near to selling the first. This is important for smaller fix-and-flip pros and larger real estate investors managing multiple offerings simultaneously.
  • You can maximize profits in a seller’s market: There are times when the real estate market becomes a gold mine. When tons of buyers are scrambling to purchase a home — such as when interest rates are at an all-time low — all you need is sufficient capital to take advantage of the situation. Getting a bridge loan helps you get the most benefit from these time-limited opportunities instead of waiting around forever for a traditional loan.

How Does Asset-Based Lending Work?

Bridge loans are a type of asset-based lending solution. ABL financing relies on equity or collateral from property to back the loan. This allows real estate investors to qualify for funding amounts and loans that they may not get otherwise. The lender is taking a risk by extending a loan to a business without going through the traditional vetting process, which is why these loans carry higher interest rates.

There are several different types of bridge lending terms, from interest rates to repayment length. You can choose the program that fits the needs of each project best. There are bridge loans with no prepayment penalties as well.

What Options Are Available for Bridge Loan Programs?

One option is to use the property you’re planning to purchase as equity for the loan. In this case, you receive funds equal to a portion of the property’s as-is value. This is the loan-to-value ratio, or LTV. This type of bridge loan generally carries an LTV of 65–70%, so you need some funds for the down payment.

Another possibility is to take out a second mortgage for the new property with your current property’s value as the collateral. This helps you cover the down payment for the new loan while you wait for your property to sell.

You can also roll both mortgages together into one bridge loan. This provides financing of about 80% LTV for the value of both properties together. That way, you can get plenty of financing for full remodeling or other needs.

When Is Bridge Financing the Right Choice?

Bridge loans are smart for your business when you see the right set of circumstances. They’re especially valuable in a fast-moving market where real estate is selling quickly. That way, you can close on the property and resell it immediately. You can even take advantage of the loan’s flexibility to make a few improvements that add to the property’s value significantly, such as opening up the dining room, adding luxury details to the kitchen or building an outdoor kitchen.

What if your goal is to buy property and manage it for several years? Any time you plan to hold on to real estate for a long time, you’re going to get more benefits from a long-term loan such as SBA financing or traditional mortgages. Even in those cases, however, bridge loans can play an important role. You can take advantage of the fast closing of a bridge loan to buy the property quickly, then transfer the balance to a long-term loan once it goes through.

If you’re not sure what decision to make, talk to a real estate financing expert right away. Reliable bridge lenders want to give you a loan that helps your business prosper. Be specific when discussing your goals and current project, and don’t hesitate to ask questions. The best financing option depends on your needs and available capital. Contact the experts at HML Solutions to learn more about bridge financing options.

Everything You Need To Know About Hard Money Loans in Palm Beach, FL

To make money, you need money. That’s true whether you’re looking to purchase inventory at great prices or planning on selling a luxury condo at a fantastic profit. Palm Beach abounds with great opportunities for making money, but first you need the capital to cover the cost. That’s where hard money loans in Palm Beach, FL can be your ticket to success.

Hard money loans can help you get the capital you need exactly when you need it. That way, you can take advantage of smart real estate opportunities as soon as they appear. Going through traditional lenders is often time-consuming and qualifying can be difficult. A hard money loan from HMLS lets you get around these hassles and reach your goals as quickly as possible. But just what are hard money loans and why should you consider them?

Hard Money Loans: The Basics

In simple terms, a hard money loan is one that uses collateral instead of your credit score as the main factor in backing the loan. Offering loans always carries some risk for banks and other lenders, because the person getting the loan may not pay it back.

That’s why, normally, lenders set high credit score requirements to limit the risk of losing their money. Unfortunately, this eliminates financing options for many business owners in Florida because few companies actually have stellar credit all the time.

Hard money loans bypass this credit requirement by using property as collateral. When a business wants to buy a piece of construction machinery, for example, the equipment itself acts as collateral, or loan security. The same thing happens with hard money loans for real estate. The property acts as collateral for the loan. This type of collateral works for pretty much any type of real estate:

  • Office buildings
  • Retail stores
  • Investment properties
  • Medical/dental offices
  • Condos
  • Outdoor malls
  • Restaurants/coffee shops
  • Automotive dealerships

These are just a few examples of real estate you can use hard money loans for. The main requirement is that the property is valuable enough to cover the cost of the loan, closing costs and other expenses.

Options for Hard Money Loans in Palm Beach, FL

In Palm Beach, most hard money loans revolve around real estate properties. The housing market is valuable and provides amazing benefits for buyers, sellers, real estate developers and house flippers alike. The way you use the money often depends on if it’s a buyers’ market or a sellers’ market, as well as the connections your business has.

For example, in a sellers’ market, you can get top dollar for investment properties that you’ve been hanging onto. In this type of market, it may be worth performing additional renovations on luxury homes to make them even more attractive to buyers. A few relatively small additions, such as an outdoor kitchen or lanai, can provide major profits. Hard money loans help by giving you an extra push of financing for this type of remodeling projects, which is something that traditional banks wouldn’t even consider.

The same thing goes when you have important friends in the industry. Maybe you’ve heard whispers of a gorgeous home that the owners haven’t put on the market yet. With a hard money loan, you can convince buyers to sell to you because you have the ability to close more quickly than companies using traditional financing.

Ways To Use Hard Money Loans for Real Estate

There are many options for real estate financing. This type of loan is pretty flexible, so it adapts well to the primary focus of your business:

  • Commercial Real Estate Properties: Use a hard money loan to purchase commercial real estate, from stores to gyms. You can use this type of loan whether you’re planning on reselling the property right away, renting it out to Palm Beach businesses or waiting for the perfect market.
  • Residential Investment Properties: Purchase properties in Palm Beach to sell to interested parties, including families, couples and individuals. You can use a hard money loan for luxury apartments, houses, condos, ultra-luxury homes, waterfront properties, townhouses, duplexes, single-family homes and multifamily properties. In other words, the sky is the limit.
  • Fix-and-Flip Projects: A hard money loan can completely cover the needs of fix-and-flip financing. In fact, hard money financing was practically made for house flipping! The two go together perfectly: you get the capital needed to buy and improve properties easily, and you sell the house quickly, paying off the loan without issues.
  • Remodeling Costs: If you already own investment real estate or an owner-occupied commercial property, you can use this property to get a hard money loan for remodeling. This is helpful for medical practices to expand their building and equipment. Restaurants, bistros, stores, movie theaters and other businesses can use the funds to give their property modern accents and incredible design flair.

FAQs About Hard Money Loans

It’s normal to want to know exactly what you can expect when you sign up for a hard money loan. The best lenders are happy to answer your questions. There’s nothing “shady” about this type of lending. Choose a hard money lender that tells you upfront about any costs or fees you can expect.

What Credit Score Do You Need for a Hard Money Loan in Palm Beach?

Honestly, your credit score isn’t important for approval. Qualifying depends more on the property than your finances. That said, if you do have good personal or business credit, you can qualify for a lower interest rate.

What Are the Terms of Hard Money Loans?

Generally speaking, you can get terms of between 6 and 12 months. It’s a good idea to choose the terms that fit your project the best. If you know you’re going to sell the property quickly, shorter terms can save you money on interest.

How Much Is the Interest Rate for Hard Money Loans in Florida?

Interest rates are always changing for all types of financing. Hard money loans often carry rates between 8% and 12%, but this can change depending on the US and local market. You can expect a higher interest rate with short-term financing than with long-term financing. In exchange, you get funds more quickly and easily.

What Other Fees Do Hard Money Loans Carry?

Every hard money lender structures fees differently. Some charge origination fees, costs for property appraisal and paperwork processing. You will probably have to pay for insurance as well. Never hesitate to ask pointed questions about fees and costs, including how interest is calculated and when payments are due.

This also applies to penalties. Ask what penalties exist if you miss a payment. Find out whether prepayment penalties apply if you want to transfer the balance ahead of time. You want a lender that explains everything clearly.

The Best Ways To Use Hard Money Loans

It’s important to understand that hard money loans are designed as short-term financing. They’re different from long-term loans such as mortgages and SBA loans. They can be amazing for generating profits for your business, but you have to use them wisely to get the maximum benefit. How do they work best?

Basically, you should use a hard money loan for the initial purchase process. Where they really shine is in closing quickly on properties. This type of financing also fills a need when it comes to things that other lenders won’t touch, such as costs for remodeling or house flipping. Traditional lenders don’t want to deal with the risk of homes that need a lot of work before they go on the market. A hard money loan is the ideal solution for that.

Your goal should be to pay off the hard money loan as quickly as possible. This reduces the total amount of interest you pay and maximizes your profits. Doing this isn’t too difficult for experienced real estate businesses because you can just use the profits from your last sale to pay off the hard money loan for your current property. This keeps your business running smoothly.

Another option is to transfer the balance from a short-term hard money loan to a long-term SBA loan or conventional mortgage. This is a popular solution for getting around the approval and waiting time associated with mortgages. You take out a hard money loan to close quickly on your chosen property while you wait for the mortgage to go through. Once that’s available, you pay off the hard money loan balance and take your time paying back the long-term, low-interest loan at your leisure.

The Advantages of Hard Money Loans in Palm Beach, FL

It’s no secret that Palm Beach is a real estate investor’s dream. The market is ripe for profits — if you have the capital to take advantage of it. Hard money loans give you capital much more quickly than traditional bank financing: a couple of weeks instead of 3–5 months. You can get funds for nearly any type of property in any condition, turning smart remodeling choices into major profits for your house flipping business. As long as you know what you’re doing, hard money loans are an incredible tool for making money.

Learn more about hard money loans in Palm Beach, FL by contact the team at HML Solutions.

How To Use Hard Money Loans to Refinance Your Mortgage

If you are thinking about refinancing your home or other real estate mortgage, you may want to consider more options than just conventional mortgages. There are many other types of real estate loans, each with its own benefits and drawbacks. A hard money loan may be the answer for your real estate refinance.

Hard Money Loans

A hard money loan is a type of short-term loan that is characterized by fast timing and relaxed regulations compared to conventional loans. In many cases, hard money loans are funded by private lenders or investment groups rather than traditional institutions like banks. Hard money loans are collateralized, typically by real property.

Often, hard money loans are used by real estate investors such as people using buy-and-hold or fix-and-flip strategies. Due to the relaxed requirements, hard money loans can be offered as interest-only loans in which the principal is paid in a balloon payment at the end (this is ideal for real estate investing). They can also be offered based on the after-renovation value of a property (this is ideal for fixing and flipping).

Reasons To Consider a Hard Money Loan

There are a few reasons that borrowers consider using hard money loans. The most common is that they would not be able to qualify for a conventional loan or because they would not be able to receive enough money through a traditional mortgage. As mentioned, hard money loans are significantly more flexible with their qualification requirements and structure. Therefore, it can be a great option when a conventional loan can’t fully satisfy your financial needs.

Another good reason to consider using a hard money loan is the speed. If you need to move quickly, you can usually get funding a lot faster with a hard money loan. Whereas a conventional loan may take months to process and close, a hard money loan could be completed in weeks or even days. These characteristics can make hard money a useful option when you need to refinance.

Who Should Use a Hard Money Loan

There are a variety of situations that may call for a hard money loan, whether to refinance or otherwise fund a real estate project. These are some common types of borrowers for these loans:

  • Fix-and-Flippers: Various real estate investors, especially those using fix-and-flip strategies often use hard money loans to help fund both buying and renovating properties. Hard money loans can offer a more flexible valuation than conventional loans, allowing people to borrow against the after-renovation value of the property.
  • Borrowers With Less-Than-Ideal Credit: People experience challenging financial straits at times. If you have less-than-perfect credit, you may want to consider a hard money loan. This applies whether you are buying a home or refinancing an existing mortgage. Hard money lenders can typically work with more potential borrowers.
  • Homeowners Who Need Equity From Their Homes: Sometimes homeowners need to access the equity in their homes quickly. This may be due to needing a major repair or because they are facing foreclosure. Whatever the circumstances may be, using a hard money loan can help you to tap into that equity right away.
  • Homeowners Who Want To Refinance Quickly and Easily: As a homeowner, choosing to refinance your mortgage can potentially help you save a significant amount of money. You can also do a cash-out refinance which helps you get some extra money to spend on your home or other needs. In either case, being able to proceed quickly and with fewer requirements may be an attractive option.

Overall, hard money loans can be valuable tools for many different types of borrowers. Anyone who wants to harness the benefits of hard money lending should consider using one.

Benefits of Using a Hard Money Loan To Refinance

There are three major benefits to using a hard money loan. Each of these can be applicable to your mortgage refinance.

1) Flexible Qualification Requirements

It is no secret that the best terms for conventional mortgages are reserved for very well-qualified borrowers. However, if you have somewhat less-than-ideal credit, you may find it difficult to qualify for a conventional mortgage refinance. This can be a problem for anyone who needs to either cash out with a refinance or wants to refinance for better terms.

Part of the reason for this is that conventional mortgages from traditional lending institutions are highly regulated. They have more complex approval processes and are limited in the terms they can offer. Therefore, the qualification requirements are quite strict.

Conversely, hard money lenders have to comply with far fewer regulations. They can offer money to people who may have difficulty qualifying otherwise. When you need to refinance, you need to refinance, even if traditional banks aren’t keen on working with you. A hard money loan may be the answer that you are looking for.

2) Fast Funding

The process for conventional mortgages can take months to complete. When you are in need of financing as soon as possible, the delay between your application and receiving funding through a conventional refinance could be potentially devastating.

For example, sometimes homeowners need to refinance and access some of their equity when facing a foreclosure. Alternatively, if your home has a sudden maintenance emergency such as a tree falling on the roof, termites or flooding, and your insurance won’t cover it, you may need to get some money quickly to ensure that your home remains inhabitable.

Hard money lenders have a much simpler process for approving loans. Again, they have to deal with fewer regulations and requirements than conventional lenders. Thus, you can get approved and funded for your refinance more quickly than would otherwise be possible. The process may take only days or weeks instead of months.

3) Flexible Terms Available

In the same way that hard money lenders can be more flexible about who they approve, they can also be more flexible about what they approve. The approval process is based primarily on your equity, which can include more than just the property you are refinancing. Depending on what you need the money for, the lender may be able to be more flexible with your loan terms.

For example, you want to refinance a property to help with renovations. Some hard money lenders will be able to let you borrow based on the after-renovation value. Hard money loans have a lot more room for negotiation and deal-making.

Drawbacks of Using a Hard Money Loan

Of course, hard money loans are not some sort of panacea for your financial needs. Like any other business, hard money lenders want to mitigate risk and increase their upside. Therefore, choosing to refinance with hard money may not always be the best option. These are some of the drawbacks:

  • Cost: The interest rates and fees associated with hard money loans are usually much higher than conventional loans. This doesn’t always mean that the loans are more expensive because they also have shorter terms. However, you should be prepared to deal with elevated costs.
  • Loan-to-Value Ratios: The loan-to-value ratios on hard money loans are typically more conservative than those available for conventional mortgages. This may not be a major issue for a refinance; however, it can be an issue if you need to get every bit of equity out of your home.
  • Short Terms: As mentioned, hard money loans always have shorter terms than conventional mortgages. Whereas you may be able to get a 30-year term for your traditional mortgage, a refinanced hard money loan will have a term of a few years at most, typically. Therefore, it may be less ideal to refinance this way if you want to be paying back the loan for a long time.

What You Need To Know About Hard Money

Hard money lenders have fewer regulations to deal with than traditional lending institutions. However, this does not mean that they can do whatever they want. By law, they must establish that all borrowers can realistically repay the loans. This includes dealing with any balloon payments. Due to the short terms, it is not likely that borrowers’ financial situations will change significantly between the application and final payment. Therefore, be prepared to show that you have the ability to repay.

It is also important to note that there are many different types of hard money loans and lenders. Not all lenders will offer refinances and even those that do may not offer cash-out refinance loans. Make sure to discuss your financial goals with any potential lender to understand whether it will be able to satisfy your needs. Some lenders may be more focused on commercial properties while others also work with residential borrowers. Make sure you find the right lender for your unique needs.

Learn More

Discover more about refinancing your home with a hard money loan today. HML Solutions may be able to help you with your home refinance needs. We work in Florida, the Bahamas, the Caribbean and Jackson, Mississippi. Contact us today to learn more about how we may be able to help with your refinance. We will get you started with a free consultation.

How Bridge Loans Make Property Acquisitions Easier in South Florida

South Florida is a prime location for investing in commercial real estate. Properties ripe for acquisition and rehabbing abound and the demand for real estate is high. The key to success is finding the financing you need when you need it. HML Solutions provides loans for property acquisitions and renovations. These bridge loans give you short-term financing up to three years, after which you can refi or sell the property.

How Investors Can Use Bridge Loans

Bridge loans are commonly used to finance the acquisition of and improvements to multifamily housing. If an investor purchases a 90 percent occupied property with the intention of updating the kitchens and baths, these renovations will have to be done over time. 

The bridge loan allows the renovations to move ahead while the owner organizes long-term financing. When they are finished, the property has more value and the owner can raise rents, making the property more attractive for long-term financing options.

Loans insured by the U.S. Department of Housing and Urban Development are an excellent way to finance a property in South Florida. The main drawback is that they can take a long time to get. A typical time frame for a HUD loan from application to receipt of money is four to six months. That’s just too long for some developers to wait.

A bridge loan can be used for the purchase of the property and paid off when the HUD loan comes in. This enables investors to move quickly on great properties when they show up on the market. HML Solutions will even underwrite the HUD loan application as a part of the process.

Bridge loans are great tools for investors utilizing the Low-Income Housing Tax Credit in South Florida, which can take a year to complete. They can also be used to hold a property while the owners evaluate the resell market. In short, any time an investor needs money quickly, a bridge loan fills in the gap.

Bridge Loan Guidelines

Because bridge loans typically include underwriting for long-term financing, they have similiar credit criteria to other commercial loans. For example, HML Solutions will evaluate factors such whether the market can support a rise in rents. It’s important to ensure that investors can secure permanent, long-term financing at the end of the bridge loan.

Investors are usually required to have 10 to 20 percent equity in the project. You will also need a solid business plan and a good net operating income. If you will be adding value through renovations or raising rents, these things will also factor into the loan.

HML Solutions offers great terms and conditions on bridge loans in South Florida. Most are adjustable-rate mortgages where you will make interest-only payments. If you pay off the loan early, you only have to pay six months interest with a one to two percent exit fee.

If you want excellent leverage for your next property acquisitions, get a bridge loan from HML Solutions. They give investors the time and money they need to bridge the gap between finding the deals and financing the deals.

Using Bridge Loans for Value-Add Investments in Florida

Although bridge loans often get an unfair bad rap, they are good tools for helping investors obtain value-add properties. In Florida, these lucrative real-estate opportunities are getting harder and harder to find, and securing a bridge loan allows you to jump on a property as soon as it becomes available. The current economy has driven up the price of most homes in metro cities around America, and while this is wonderful for the nation, it makes it difficult for investors to turn a profit on their properties. Having the right financing in place is a key strategy for obtaining value-add properties.

What Bridge Loans Can Offer

Contrary to popular opinion, bridge loans are not hard money loans. This avenue of financing is a short-term loan that often only lasts 12 months, but it bridges the gap in equity that is caused when cap rates are reduced and property prices rise. While borrowers need more money to close real estate deals, lenders become more conservative because they are not sure they will recoup their money. Bridge loans allow borrowers to finance up to 85 percent of property costs so that they have the chance to add value to their properties and earn a profit by selling.

Bridge Loans Vs. Permanent Financing

Permanent financing often provides borrowers with up to 80 percent of the funding they need. This rate is rare in the current market, but bridge loans with up to 85 percent financing are still readily available. For investors who focus solely on rate, bridge loans may seem like a risky venture, but if you want the opportunity to expand your acquisitions in the future, bridge loans are a good investment. This avenue of financing comes with the following advantages.

  • Flexibility: Bridge loans give you additional purchasing power so you can find properties that will turn a decent profit.
  • Speed: Bridge loans are often approved more quickly than other types of financing.
  • Convenience: Bridge loans allow you to purchase real estate as it becomes available rather than the sale being contingent upon selling another property.

Determinning If a Bridge Loan Is Right for You

Like any financial solution, bridge loans are not right for everyone. If you plan to use this type of financing to add value to a property and turn a profit, you must have a plan in mind to make your investment a success. A bridge loan is inherently risky, so if you want a structured 10-year loan that you know will pay off, this avenue of financing is not right for you. However, as a calculated risk, bridge loans offer substantial potential rewards.

A bridge loan can be useful for securing value-add property in Florida. While property is scarce, bridge loans provide investors with the funds they need to make quick decisions on buying without the contingency of selling another piece of real estate. If you want a flexible financing solution that will equip you to take big financial risks in exchange for payoffs that have the potential to be significant, a bridge loan could be perfect for you. Contact HML Solutions today to discuss your options.