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When a residential or commercial real estate investor or property owner desires to tap into the equity they accumulated through value appreciation or through improvements made to the property, they can approach a hard money equity lender for financing. Traditional sources of real estate equity loans such as commercial banks and mortgage lenders have severely tightened their lending guidelines due to the recent turmoil in the credit markets and real estate values. Due to this, investors and property owners have been increasingly turning to hard money lenders for real estate equity loans on both commercial and residential properties.

When to Approach a Hard Money Mortgage Equity Lender for an Equity Loan?

When the investor or borrower profile doesn’t meet the strict lending criteria of banks, the only option for funds may be a equity hard money lender. They approach funding scenarios with an open mind while keeping the entire profile of the borrower in perspective. Bad credit borrowers find it very hard to get a loan due to the sub-prime lending collapse, even in cases where they have significant equity to offer as security for the loan. Unlike banks, private money equity investors can spend the time and dedicate the resources to get a clear picture of the loan scenario to provide the necessary money resources.

To compensate for the risk and unconventionality involved in the loans they provide, the hard money equity lenders on both residential and commercial properties usually have high interest rates irrespective of the fed funds rate. They also have shorter loan terms and high fees. But these are understandable due to the risk they assume. Without high returns private money investors wouldn’t find these loans or borrowers worth their time and resources.

Residential Home Equity Loans from Hard Money Equity Lenders

Hard money home equity lenders can finance equity loans on residential properties. They usually prefer to be the first lien holder on a property they finance. But in lending situations where there is a preexisting first lien on a property, they can take on the second lien provided the combined LTV (Loan-to-Value) on the property is less than 70%. Substantial equity is the primary criteria that guides the funding decisions for residential properties such as town homes, single-family properties, duplexes, triplexes, condos and multi-family homes with less than four units.

Hard money equity lenders can also finance the repair and rehab costs if the property has already been purchased but in need of repairs. In construction and rehab loan scenarios the equity is determined based on the after repair value of the property.

Commercial Property Equity Loans From Hard Money Equity Lenders

Equity available in commercial properties can be tapped through equity loans from hard money equity lenders. Equity in commercial properties such as office buildings, apartment complexes, retail facilities, health care nursing facilities and industrial properties can be financed through these lenders. Most of the commercial hard money equity lenders are quite flexible and accommodating compared to the traditional sources of financing. Construction and rehab work involved in fixing commercial properties can also be financed through hard money equity loans as long as the after repair value of the collateralized property supports the loan amount.

Bridge Equity Lenders

In situations where the property on which loan is sought doesn’t have enough equity, bridge equity loans from hard money equity lenders can be availed. The flexible guidelines of most of the lenders allow them to cross-collateralize properties i.e. equity in one property can be used for making a loan for another property in which there is not much available equity. In crunch real estate deals where time is of the essence these bridge equity lenders can be the appropriate and most suitable option.