Hard Money Lenders Austin: What to Know
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Kelsey Morrison EditorClose
Kelsey Morrison EditorKelsey Morrison is an editor for HomeLight's Resource Centers with seven years of editorial experience in the real estate and lifestyle spaces. She previously worked as a commerce editor for World of Good Brands (eHow.com and Cuteness.com), and as an associate editor for Livabl.com. Kelsey holds a bachelor’s degree in Journalism from Concordia University in Montreal, Quebec, and lives in a small mountain town in Southern California.
At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. Therefore, we promote strict editorial integrity in each of our posts.
Are you looking to kickstart your next real estate project in Austin with a hard money loan? Whether you’re eyeing a fixer-upper in East Austin or an investment property near the bustling downtown area, hard money lenders in Austin can offer the flexibility and funding speed you need. Unlike traditional loans, hard money loans are often favored by investors with tight timelines, limited initial capital, or unique credit challenges.
This guide will walk you through the basics of hard money lending in Austin. We’ll cover how these loans work, their typical uses, and potential costs. We’ll also explore some alternatives to hard money loans, introduce top local lenders, and discuss whether partnering with a hard money lender is the right move for your real estate goals.
Start Making Offers Without Waiting to Sell Your Home
Through our Buy Before You Sell program, HomeLight can help you unlock a portion of your equity upfront to put toward your next home. You can then make a strong offer on your next home with no home sale contingency.
What is a hard money lender?
A hard money lender is a private entity or company offering short-term loans secured by real estate. Unlike traditional lenders, who focus on a borrower’s credit history and income, hard money lenders in Austin consider the value of the property used as collateral. Their clientele typically includes real estate investors like house flippers and those acquiring rental properties.
These lenders use after-repair value (ARV) — the estimated value of a property post-renovation — to determine loan amounts. Generally, they lend a percentage of the ARV to maintain a secure investment margin.
Hard money loans come with higher interest rates, typically between 8% and 15%, and shorter terms, often 6 to 24 months. Borrowers also face additional costs like origination fees, closing costs, and points. Failure to repay a hard money loan can lead to the lender seizing the property to recover their investment.
How does a hard money loan work?
If you’re a real estate investor in Austin seeking a financing option that offers speed and flexibility, hard money loans could be the perfect solution. Here’s a brief overview of how these loans work:
- Short-term loan: These loans typically have a repayment period of 6 to 24 months, unlike the 15- or 30-year terms of conventional mortgages. Some lenders may extend the term up to 36 months if necessary.
- Faster funding option: When you need to close a deal quickly, hard money loans can be approved within days, compared to the 30 to 50 days typical for a mortgage loan.
- Less focus on creditworthiness: Approval relies less on your credit score or income history and more on the property’s value.
- More focus on property value: These loans require collateral, such as a home, and are based on the loan-to-value ratio of the property.
- Not traditional lenders: Individual investors or private lending companies usually provide hard money loans, not traditional banks.
- Loan denial option: These loans are often used by those with poor credit who have been denied a mortgage but possess significant home equity.
- Higher interest rates: Due to higher risk, these loans have higher interest rates than traditional mortgages.
- Might require larger down payments: Borrowers may need to provide a larger down payment, sometimes up to 20%–30%, depending on the property’s value and loan specifics.
- More flexibility: With less government regulation, hard money lenders in Austin can set flexible credit scores and debt-to-income (DTI) criteria, and loans can help avoid foreclosure.
- Potential for interest-only payments: Unlike traditional mortgages, hard money loans may allow for interest-only or deferred payments initially.
What are hard money loans used for?
Hard money loans cater to unique financing needs in Austin’s real estate market. They are ideal for investors and homeowners who require quick access to funds or face challenges in securing traditional bank loans. Here’s a look at common uses for hard money loans:
Flipping a house: For Austin investors focused on flipping homes, hard money loans provide fast cash for buying and renovating properties. These loans allow flippers to quickly acquire homes, make necessary renovations, and resell them for profit within a short timeframe.
Buying an investment rental property: Investors seeking rental properties can use hard money loans to quickly purchase homes, especially those needing repairs. This type of loan allows landlords to complete renovations quickly and start generating rental income sooner than with traditional loans.
Purchasing commercial real estate: Hard money loans are great for buying commercial properties because they offer flexibility and fast approval. This makes them especially helpful when timing is crucial, allowing investors to quickly secure valuable real estate opportunities.
Borrowers who can’t qualify for traditional loans: Individuals with significant home equity but poor credit often turn to hard money lenders for assistance. These loans are based more on the property’s value than the borrower’s credit score, offering a viable option for those unable to secure conventional financing.
Homeowners facing foreclosure: Homeowners at risk of foreclosure may use hard money loans to refinance debts or gain extra time to sell their property. This can help avoid the foreclosure process and its impact on their credit report.
How much do hard money loans cost?
Hard money loans typically come with higher costs compared to traditional loans due to the increased risk and convenience of quick funding. Here are some typical costs associated with hard money loans:
- Interest rates: These can range from 8% to 15%, depending on the lender’s risk assessment.
- Origination fees: Lenders may charge 1% to 5% of the total loan amount as an origination fee.
- Closing costs: Additional fees at closing can include legal fees, appraisal fees, and other administrative costs.
- Points: Lenders might charge points (a percentage of the loan amount) upfront, adding to the initial cost of obtaining a loan.
Online calculators can help estimate these costs and give you a better idea of your total expenses.
Alternatives to working with hard money lenders
If you’re a homeowner looking to leverage your current home’s equity, you might want to consider these alternatives:
Take out a second mortgage: If you have significant equity, a home equity loan or home equity line of credit (HELOC) can provide funds at lower interest rates compared to a hard money loan.
Cash-out refinance: This option allows you to refinance an existing property, pulling out cash to finance your new investment, often with lower interest rates than hard money loans.
Borrow from family or friends: A personal loan from family or friends can offer flexible repayment terms and potentially lower or no interest rates, making it a more affordable option.
Use a government-backed loan program: Programs offered by the FHA, VA, or USDA can help buyers purchase homes with lower down payments and reduced interest rates.
Peer-to-peer loans: These loans are provided by individual investors through lending platforms like LendingClub or Prosper, functioning similarly to hard money loans but often with different terms.
Specialized loan programs: Consider specialized loans for fixer-uppers or investment property refinancing if you already have a hard money loan and seek to replace it.
Request a seller financing option: In some cases, sellers may agree to finance the purchase themselves, which can result in lower closing costs and less stringent eligibility requirements.
How to buy before you sell
Sometimes, the perfect home listing pops up out of nowhere. Maybe it’s a charming bungalow in historic Hyde Park or a loft-style condo in the Market District. If you’re an Austin homeowner wanting to buy a new home before selling your current one, HomeLight offers an innovative solution that simplifies the process.
The Buy Before You Sell (BBYS) program lets you tap into the equity of your current home to make a strong, non-contingent offer on a new property. Once your home qualifies, you can get your equity unlock amount approved within 24 hours with no cost or commitment required. This allows you to purchase your new home first and then sell your current home vacant, eliminating the stress of moving twice.
Here’s how HomeLight Buy Before You Sell works:
While there is a flat fee of 2.4% of your current home’s sold price, the savings in other areas can offset this cost. You could save on moving expenses, temporary housing, and potentially get a better deal on your new home. Plus, HomeLight’s BBYS fees are usually much lower than the interest rates on bridge loans, which range from 9.5% to 12%.
3 top hard money lenders in Austin
Traditional lenders might not suit every real estate investment scenario. If you need to act fast and seize an opportunity, consider working with one of these top-rated hard money lenders in Austin.
Loan Ranger Capital
Austin-based Loan Ranger Capital is a direct hard money lender serving Texas and Tennessee. They specialize in fix-and-flip, construction, and bridge loans, leveraging their local market expertise for fast closing times. Loan Ranger Capital offers funding for non-owner occupied investment properties, often within a week.
Lending clientele: Commercial and residential real estate investors
Loan criteria: Maximum LTV in most cases is 70%–75%
Loan Ranger Capital boasts a perfect 5-star rating on Google, with over 100 reviews. Clients praise the team’s quick processing times, responsiveness to questions, and friendly service. “Loan Ranger Capital deserves high praise for their lighting-fast draw process,” reads a recent review. “From start to finish, they make securing financing a breeze. Their streamlined approach and rapid response time sets them apart in the industry.”
512-220-9916
HouseMax Funding
HouseMax Funding, based in Austin, is a hard money lender that provides home renovation loans, non-owner occupied hard money loans, and hard money construction loans throughout Texas and beyond. Since launching the business seven years ago, they have funded over 3,500 deals and flipped more than 3,000 houses. Applicants can get pre-qualified in just a few minutes, and loans can be funded in 10 days or less.
Lending clientele: Residential real estate investors
Loan criteria: Up to 75% of the ARV
HouseMax Funding is not accredited by the Better Business Bureau (BBB); however, they maintain an A+ rating. They also have a Google rating of 4.8 stars based on more than 200 reviews. Customers praise their responsiveness, expertise, and efficiency. “HouseMax is one of the best teams that I’ve worked with during my time in the industry,” wrote one reviewer. “They are extremely responsive, knowledgeable, but even more so — friendly!”
512-759-8326
Park Place Finance
Park Place Finance, based in Austin, is a trusted hard money lender that has funded over $1 billion since 2006. They lend in 47 states, including Texas, and offer a variety of loan programs like fix-and-flip, bridge, DSCR, and ground-up construction. Whether you’re buying or refinancing an investment property, they’ll work with you to fund a loan in three to five days using in-house capital.
Lending clientele: Residential real estate investors and homeowners
Loan criteria: Up to 75% of the ARV
Park Place Finance is not BBB-accredited, but they do hold an A+ rating. They also have a 4.7-star rating on Google based on more than 200 reviews. Customers highlight their speed, efficiency, and exceptional service. “Connor went above and beyond to save my client’s purchase deal after it fell through with another lender,” wrote one reviewer. “His team worked diligently to ensure we could close the deal quickly.”
866-407-1599
Investing in real estate?
Hire an investor-friendly real estate agent who can help you get access to off-market properties at a discount and assess potential rental income based on market trends. HomeLight can connect you with investment property specialists at no cost.
Should I partner with a hard money lender in Austin?
The decision to use a hard money lender in Austin should be based on your specific situation and real estate investment goals. Hard money loans are ideal for projects requiring quick turnaround or when traditional financing simply isn’t an option. If you’re ready to handle higher costs and shorter repayment terms in exchange for fast, flexible funding, a hard money loan in Austin might be your best choice.
Real estate investors, especially those focusing on quick flips or rental property acquisitions, can benefit significantly from the speed and flexibility of hard money loans. However, for homeowners looking to leverage their equity, HomeLight’s Buy Before You Sell program might be a better fit. Instead of facing high interest rates, you’ll pay a small flat fee while enjoying the advantage of a stronger, non-contingent offer on your new home.
As with any major financial decision, consider your long-term strategy and consult with a financial advisor to ensure it aligns with your investment goals. For those looking to connect with investor-friendly real estate agents in Austin who have access to trusted hard money lenders, let HomeLight introduce you to top professionals in the area.
Photo Credit: (Carlos Alfonso / Unsplash)
- "What is ARV and how is it calculated?," Rehab Financial Group (June 2023)
- "What Is Loan-to-Value and Why Does it Matter?," U.S. News, Ben Luthi & Rebecca Safier (March 2024)
- "A Comprehensive Guide to Common Terms Used in Hard Money Lending," LinkedIn, Joseph Walker (September 2023)
- "What Are The Costs Involved In A Hard Money Loan?," NorthWest Private Lending (March 2024)
- "Bridge Loan Rates: Current 2024 Interest Rates," Vaster (October 2023)
