Hard Money Lenders Colorado Springs: Fast Financing Solutions
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Joseph Gordon EditorJoseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.
If you’re considering a hard money loan for your next property acquisition in Colorado Springs, you’re in the right place. This guide will walk you through everything you need to know about hard money lenders in Colorado Springs, from understanding what they are to exploring your best options.
Whether you’re a seasoned investor looking to flip homes or a homeowner needing quick funding, hard money loans can offer a viable solution. We’ll cover the ins and outs of these loans, their benefits and drawbacks, and alternatives worth considering.
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Editor’s note: This post is for educational purposes and is not intended to be construed as financial advice. HomeLight always encourages you to consult your own advisor.
What is a hard money lender?
A hard money lender is a private investor or company that offers short-term loans secured by real estate. They primarily work with real estate investors like house flippers and those seeking to invest in rental properties. Interest rates for hard money loans are typically higher than traditional loans, ranging from 8% to 15%.
Instead of focusing on the borrower’s credit score, these lenders base loan amounts on the property’s after-repair value (ARV). ARV is the estimated value of the property once renovations are complete.
Additionally, fees such as origination and closing costs can add to the total expense. If a borrower fails to repay a hard money loan, the lender can foreclose on the property, similar to traditional mortgage practices.
How does a hard money loan work?
Hard money loans offer real estate investors a unique funding solution compared to traditional financing. Here’s how they work:
- Short-term loan: Hard money loans are usually short-term, often spanning from six months to a few years.
- Faster funding option: These loans can be processed much quicker than traditional 30-year mortgages, often within days instead of weeks.
- Less focus on creditworthiness: Lenders focus less on your credit score and more on the property’s potential value.
- More focus on property value: The loan amount is based on the property’s ARV, making it ideal for fixer-uppers.
- Not traditional lenders: Hard money lenders are private individuals or companies, not banks or credit unions.
- Loan denial option: If the property doesn’t meet the lender’s criteria, the loan may be denied.
- Higher interest rates: Interest rates range from 8% to 15%, reflecting the increased risk.
- Might require larger down payments: Down payments can be significant, often 20%–30% of the property’s value.
- More flexibility: Lenders may offer more flexible terms compared to traditional loans.
- Potential for interest-only payments: Some lenders allow interest-only payments for the loan term, with the principal due at the end.
What are hard money loans used for?
Hard money loans can be a good tool, depending on your situation. Here are some common examples:
- Flipping a house: Ideal for those flipping homes who need quick funds to purchase and renovate properties.
- Buying an investment rental property: Useful for acquiring rental properties that might not qualify for traditional financing.
- Purchasing commercial real estate: Can be leveraged to buy commercial properties when traditional loans fall short.
- Borrowers who can’t qualify for traditional loans: This is a viable option for those with less-than-perfect credit who still want to invest in real estate.
- Homeowners facing foreclosure: Can provide fast funds to avoid foreclosure and potentially save their homes.
How much do hard money loans cost?
The cost of hard money loans is generally higher than traditional loans due to the increased risk and convenience. These costs can include:
- Interest rates: These can range from 8% to 15% or higher, depending on the lender’s risk assessment.
- Origination fees: Lenders may charge an origination fee of 1% to 5% of the total loan amount.
- 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, which can add to the initial cost of obtaining a loan.
There are also online calculators available to help you estimate costs.
Alternatives to working with hard money lenders
If you’re a homeowner or investor considering different funding options, here are a few alternatives:
- Take out a second mortgage: Home equity loans or lines of credit can provide needed funds at lower interest rates.
- Cash-out refinance: Refinance an existing property to pull out cash for new investments.
- Borrow from family or friends: Personal loans from family or friends can offer flexible repayment terms and potentially lower or no interest rates.
- Use a government-backed loan program: FHA, VA, or USDA loans can help you purchase homes with lower down payments and reduced interest rates.
- Peer-to-peer loan: Loans provided by individual investors through platforms like Funding Circle, often with different terms.
- Specialized loan programs: Consider specialized loans for fixer-uppers or refinancing investment properties.
- Request a seller financing option: Sellers may agree to finance the purchase, resulting in lower closing costs and less stringent eligibility requirements.
How to buy before you sell
HomeLight’s Buy Before You Sell program offers a seamless way to buy a new home before selling your current one. This program allows you to make a competitive offer on a new home with HomeLight’s backing, ensuring you don’t miss out on your dream property.
Benefits include avoiding the stress of selling your home first, moving at your own pace, and potentially receiving up to 90% of your home’s current value to use as a down payment.
The costs for this program can vary, but interest rates range generally from 9.5% to 12%. By using this program, you can comfortably transition to your new home without the pressure of simultaneous buying and selling.
Here’s how HomeLight Buy Before You Sell works:
Although there’s a flat fee of 2.4% of your current home’s sold price, the potential savings in other areas might outweigh the cost. For example, you might save on moving expenses, temporary housing, and even the final purchase price of your new home.
2 top hard money lenders in Colorado Springs
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 Colorado Springs.
Colorado Hard Money
Colorado Hard Money is a private money lender in both commercial and residential sectors. The company leverages the collective expertise of partners who have amassed over 100 years of commercial real estate lending since 1975.
Lending clientele: Real estate investors
Loan criteria: 60% maximum LTV
Colorado Hard Money has a 5 star rating on Google.
303-963-9251
Hard Money Mike
Hard Money Mike is a personalized lending service tailored specifically for real estate investors. It emphasizes direct human interaction over automated processes.
Lending clientele: Real estate investors, fix and flips
Loan criteria: Up to 100% of purchase and 100% of rehab
Hard Money Mike has a 4.8 star rating on Google based on 39 reviews.
303-539-3000
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 Colorado Springs?
Hard money loans are often best for real estate investors who need quick access to funding for property flips or investment projects. They offer flexibility and speed, which are essential in a competitive market like Colorado Springs. The decision to utilize this kind of funding will depend on your needs.
However, if you’re a homeowner looking to leverage your equity, HomeLight’s Buy Before You Sell program might be a better fit. By working with HomeLight, you can buy a new home before selling your current one, providing a smoother transition.
Header Image Source: (Curtis Adams/ Pexels)
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