Hard Money Lenders Illinois: Compare Your Options

What are hard money loans used for?

Hard money loans cater to various specific needs in the Illinois real estate market. They are often preferred by investors who need quick funding or those who find it challenging to qualify for traditional bank loans. Here’s how these loans are commonly used:

Flipping a house
For Illinois investors involved in flipping homes, hard money loans offer quick access to funds for buying and renovating properties. These loans enable flippers to acquire homes, complete necessary renovations, and resell them for profit in a short period.

Buying an investment rental property
Investors looking to purchase rental properties can benefit from hard money loans to secure properties rapidly, especially those requiring immediate repairs. This helps landlords to complete renovations and start earning rental income sooner than with traditional loans.

Purchasing commercial real estate
In commercial real estate, hard money loans are valued for their flexibility and swift closing times. They are particularly useful when timing is critical, allowing investors to secure lucrative commercial properties without delay.

Borrowers who can’t qualify for traditional loans
Individuals with significant home equity but poor credit or other disqualifying factors often rely on hard money loans. These loans emphasize the asset’s value over the borrower’s credit score, offering an alternative financing route.

Homeowners facing foreclosure
Homeowners close to foreclosure can use hard money loans to refinance debts or gain time to sell their property. This can provide a temporary solution to avoid foreclosure and prevent damage to their credit report.

How much do hard money loans cost?

The cost of hard money loans is generally higher than traditional loans due to increased risk for the lender, combined with faster funding. Typical costs include:

• 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 include legal, appraisal, and administrative costs.
• Points: Lenders might charge points upfront, a percentage of the loan amount.

Online calculators can also help you estimate these costs.

Alternatives to working with hard money lenders

If you’re a homeowner looking to leverage your current home’s equity, consider these options:

1. Take out a second mortgage
   A home equity loan or HELOC allows you to access your home’s equity at a lower interest rate compared to a hard money loan.
2. Cash-out refinance
   Refinancing your existing mortgage can provide you with cash for new investments, often at lower interest rates than hard money loans. Learn more about refinance options.
3. Borrow from family or friends
   Loans from family or friends can offer flexible repayment terms and potentially lower or no interest rates, making it a cost-effective solution.
4. Use a government-backed loan program
   Programs like those offered by the FHA, VA, or USDA can help you purchase homes with lower down payments and reduced interest rates.
5. Peer-to-peer loan
   These loans are provided by individual investors through lending platforms. They function similarly to hard money loans but often have different terms.
6. Specialized loan programs
   Look into loans designed for specific needs, such as fixer-uppers or refinancing investment properties, which might offer better terms than hard money loans.
7. Request a seller financing option
   In some cases, sellers may agree to finance the purchase directly, which can reduce closing costs and make qualification easier.

How to buy before you sell

Sometimes, the perfect home becomes available when you least expect it. If you find yourself needing to buy a new home before selling your current one, you might want to consider funding alternatives. HomeLight offers such an alternative with their innovative Buy Before You Sell program.

The Buy Before You Sell (BBYS) program allows you to leverage the equity in your current home to make a stronger, non-contingent offer on a new property. If your home qualifies, you can get your equity unlock amount approved within 24 hours, with no cost or commitment required. This enables you to confidently purchase your next home and then sell your current one vacant, avoiding the hassle of moving twice.

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. You might save on moving expenses, temporary housing, and even the final purchase price of your new home. Additionally, HomeLight’s BBYS fees are typically much lower than the interest rates on bridge loans, which currently range from 9.5% to 12%.

3 top hard money lenders in Illinois

Should I partner with a hard money lender in Illinois?

Deciding whether a hard money loan is right for you in Illinois depends on your specific real estate investment goals.

Best suited for real estate investors: Hard money loans are ideal for real estate investors who need quick funding or cannot secure traditional financing. These loans provide fast, flexible funding but come with higher costs and shorter repayment terms.

Alternative for homeowners: For homeowners looking to leverage their home’s equity, HomeLight’s Buy Before You Sell program offers a practical alternative. This program allows you to pay a small flat fee instead of high interest rates, providing a more competitive offer and simplifying the moving process.

Considerations: Always consider your long-term strategy and consult with a financial advisor to ensure alignment with your overall investment goals.

Connect with professionals: If you want to connect with investor-friendly real estate agents in Illinois who have access to trusted hard money lenders, HomeLight can introduce you to top professionals in your area.

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