Hard Money Lenders Chicago: Top Choices and Alternative Financing Options

What are hard money loans used for?

Need cash fast for a hot property deal in Chicago? Or maybe traditional banks are giving you the runaround? Hard money loans can be your saving grace in the Chicago real estate market. Let’s see how they come in handy:

Flipping a house: Chicago investors involved in flipping homes can benefit from hard money loans to quickly purchase and renovate properties. These loans enable quick turnarounds, allowing flippers to acquire competitive properties, make essential renovations, and sell them for a profit in a short period.

Buying an investment rental property: For those looking to invest in rental properties, hard money loans offer a speedy way to acquire and repair properties. Unlike traditional bank loans, these loans help landlords complete renovations quickly and start earning rental income sooner.

Purchasing commercial real estate: Hard money loans are useful in commercial real estate due to their flexibility and fast approval process. This is particularly beneficial in situations where timing is crucial, helping investors secure valuable properties without delay.

Borrowers who can’t qualify for traditional loans: Individuals with substantial home equity but poor credit or other financial issues can turn to hard money lenders. These loans rely more on the property’s value rather than the borrower’s credit score for approval.

Homeowners facing foreclosure: Homeowners close to foreclosure may use hard money loans to refinance their debt or buy time to sell their property. This can provide a temporary solution to avoid foreclosure and the negative impact on their credit.

How much do hard money loans cost?

Hard money loans generally cost more than traditional loans due to the higher risk and convenience of quick funding. Here’s a breakdown of some of the typical costs involved:

• 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.
• Closing costs: Additional fees at closing can include legal fees, appraisal fees, and administrative costs.
• Points: Lenders might charge points (a percentage of the loan amount) upfront, adding to the initial cost.

You can use online calculators to estimate your total costs.

Alternatives to working with hard money lenders

If you’re not an investor, but rather a homeowner looking to leverage your home’s equity, here are a few alternatives to consider:

Take out a second mortgage: If you have substantial equity, a home equity loan or home equity line of credit (HELOC) can provide funds at a lower interest rate compared to a hard money loan.

Cash-out refinance: This option allows you to refinance your existing property and pull out cash to finance new investments, 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 like the FHA, VA, or USDA can help with purchasing homes through lower down payments and reduced interest rates.

Peer-to-peer loan: These loans are provided by individual investors through lending platforms, functioning similarly to hard money loans but often with different terms.

Specialized loan programs: Consider specialized loans for fixer-uppers or refinancing investment properties if you want to replace an existing hard money loan.

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 listing just pops up out of nowhere. Maybe it’s a penthouse unit with a rooftop deck or a 1930s Chicago bungalow. If you’re a local homeowner wanting to buy a new home before selling your current one, HomeLight has an innovative solution to simplify the process.

The Buy Before You Sell (BBYS) program lets you use the equity in your current home to make a strong, non-contingent offer on a new property. If your home qualifies, you can get your equity unlock amount approved within 24 hours, with no upfront cost or commitment. Once approved, you can purchase your new home and sell your existing one vacant, eliminating the stress of moving twice.

Here’s how HomeLight Buy Before You Sell works:

The program charges a flat fee of 2.4% of your current home’s sale price, but the potential savings in other areas can outweigh this cost. You might save on moving expenses, temporary housing, and even secure a better price on your new home. Additionally, HomeLight’s BBYS fees are generally much lower than bridge loan interest rates, which currently range from 9.5% to 12%.

Traditional lenders might not be the solution for every real estate investment. If you’re looking to move quickly and capitalize on an opportunity, explore the hard money lending options available in Chicago.

Should I partner with a hard money lender in Chicago?

Deciding whether a hard money loan is right for you depends on your specific needs and real estate investment objectives. Hard money loans are best suited for Chicago real estate investors who need quick access to funds, particularly for projects with fast turnaround times or when traditional financing isn’t an option.

If you’re prepared to handle the higher interest rates and shorter repayment periods in exchange for rapid and flexible funding, consider reaching out to a hard money lender in Chicago for your next investment venture.

For homeowners seeking to leverage their home’s equity, HomeLight’s Buy Before You Sell may be a better alternative. This program allows you to make a competitive offer on a new home while paying a small flat fee, avoiding the high interest rates associated with hard money loans and simplifying your move.

As with any important financial decision, you should consider your long-term strategy and consult with a financial advisor to ensure it aligns with your overall investment goals. If you’re looking for investor-friendly real estate agents in Chicago who can connect you with trusted hard money lenders, HomeLight can introduce you to top professionals in your area.

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