Hard Money Lenders in Massachusetts: What You Need to Know
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Kelsey Morrison Former HomeLight EditorClose
Kelsey Morrison Former HomeLight EditorKelsey Morrison worked as an editor for HomeLight's Resource Centers. She has 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.
Are you exploring ways to fund your next real estate venture in Massachusetts? Whether you’re looking to flip a Cape Cod-style house in Danvers or invest in a rental property in Worcester, hard money lenders in Massachusetts offer the flexibility and speed to meet your needs. These alternative financing solutions are perfect for those who need quick funding, have limited initial capital, or face credit challenges.
This article will walk you through the essentials of hard money lending in Massachusetts, helping you determine if this financial tool suits your real estate goals. From understanding how hard money loans work to exploring their uses and costs, we’ll cover everything you need to make an informed decision. Plus, we’ll introduce some alternatives and explain how HomeLight’s Buy Before You Sell program can help you leverage your home’s equity.
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.
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 individual or company that provides short-term loans secured by real estate. Unlike traditional lenders who focus on the borrower’s creditworthiness, hard money lenders prioritize the property’s value. They cater to real estate investors, such as house flippers and those purchasing rental properties, who need quick access to funds and flexible terms.
Hard money lenders determine loan amounts based on the after-repair value (ARV) — the estimated value of the property after renovations. They typically lend a percentage of the ARV to ensure profitability and security.
Interest rates for hard money loans are higher, ranging from 8% to 15% or more, with repayment periods of 6 to 24 months. Costs include origination fees, closing costs, and points. If a borrower fails to repay, the lender can seize the property to recover their investment.
How does a hard money loan work?
If you’re a real estate investor in Massachusetts looking for fast and flexible financing, working with hard money lenders could be a smart move. Here’s a breakdown of how hard money loans work:
- Short-term loan: These loans typically have a repayment period of 6 to 24 months, much shorter than the 15- or 30-year terms of conventional mortgages. Some lenders might offer extensions of up to 36 months if needed.
- Faster funding option: Hard money loans can be approved within days, a significant advantage compared to the 30 to 50 days typical for mortgage loans, allowing you to close deals quickly.
- Less focus on creditworthiness: Approval depends less on your credit score or income history and more on the property’s value, making it easier for those with less-than-perfect credit to secure funding.
- More focus on property value: Hard money loans are based on the loan-to-value ratio of the property, using the property as collateral to secure the loan.
- Not traditional lenders: These loans are provided by individual investors or private lending companies rather than traditional banks, offering more personalized and flexible terms.
- Loan denial option: Hard money loans are often sought by those with poor credit who have been denied a mortgage but possess significant home equity.
- Higher interest rates: Due to the higher risk involved, these loans come with higher interest rates than traditional mortgages, reflecting the increased cost of borrowing.
- Might require larger down payments: Borrowers may need to fork over a larger down payment, sometimes up to 20%–30%, depending on the property’s value and loan specifics.
- More flexibility: With fewer government regulations, hard money lenders can set flexible credit scores and debt-to-income criteria, and these 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, offering more flexibility in managing cash flow.
What are hard money loans used for?
Hard money loans cater to specific financing needs in Massachusetts. They are often sought after by investors needing quick funding or those who face challenges with traditional bank loans. Let’s take a look at some common uses for hard money loans:
Flipping a house: For Massachusetts investors focused on flipping homes, hard money loans provide quick access to cash for purchasing and renovating properties. These loans allow flippers to compete in competitive markets, complete renovations, and resell properties for profit in a short period of time.
Buying an investment rental property: Investors looking to acquire rental properties can use hard money loans to secure properties quickly, especially those in need of repairs. These loans allow landlords to make necessary improvements and start generating rental income faster than traditional bank loans.
Purchasing commercial real estate: Hard money loans are great for commercial real estate deals because they offer flexibility and quick closings. They’re perfect when timing is critical, helping investors secure valuable properties without long approval waits.
Borrowers who can’t qualify for traditional loans: Individuals with significant home equity but poor credit or other disqualifying factors often partner with money lenders. These loans prioritize the asset’s worth over the borrower’s credit score, providing a viable financing option for those who might be turned down by traditional lenders.
Homeowners facing foreclosure: Homeowners nearing foreclosure can use hard money loans to refinance their debts or buy time to sell their property. This can be a temporary solution to avoid losing their home or having a foreclosure mark on their credit report.
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 quick, flexible funding they offer. Here are some typical costs associated with hard money loans:
- Interest rates: These can range from 8% to 15% or higher, based 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, increasing the initial cost of obtaining a loan.
You can use online calculators to estimate these costs accurately.
Alternatives to working with hard money lenders
Not a real estate investor? Homeowners looking to leverage their current home’s equity may want to consider the following options:
Take out a second mortgage: With substantial equity in your home, a home equity loan or home equity line of credit (HELOC) can provide necessary funds at a lower interest rate compared to hard money loans.
Cash-out refinance: This option lets you refinance your existing property, pulling out cash to finance new investments. It is often offered at lower interest rates than hard money loans.
Borrow from family or friends: Personal loans from family or friends can offer flexible repayment terms and potentially lower or no interest rates, making them a more affordable option.
Use a government-backed loan program: Programs like those from the FHA, VA, or USDA can assist in purchasing homes with lower down payments and reduced interest rates.
Peer-to-peer loans: These loans are provided by individual investors through lending platforms and function similarly to hard money loans but often with different terms.
Specialized loan programs: If you already have a hard money loan and want to replace it, consider specialized loans for fixer-uppers or investment property refinancing.
Request a seller financing option: In certain cases, sellers may agree to finance the purchase themselves, resulting in lower closing costs and less stringent eligibility requirements.
How to buy before you sell
Sometimes, the perfect listing comes along when you least expect it. Perhaps it’s a charming colonial home in Newburyport or an industrial-style loft in East Boston. If you’re a Massachusetts homeowner wanting to buy a new home before selling your current one, HomeLight offers an innovative solution to simplify the process.
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:
The program has a flat fee of 2.4% of your current home’s sold price. However, the potential savings in other areas can outweigh this cost. For instance, you might save on moving expenses, temporary housing, and even negotiate a better purchase price for your new home. Additionally, HomeLight’s BBYS fees are generally much lower than the interest rates on bridge loans, which currently range from 9.5% to 12%.
3 top hard money lenders in Massachusetts
Traditional lenders aren’t always the best fit for every real estate deal. If you need to act fast and grab an opportunity, consider working with one of these reputable hard money lenders in Massachusetts.
TMD Capital
Located in western Massachusetts, TMD Capital is a direct, private lender specializing in funding non-owner-occupied residential and commercial properties. Founded in 2019, TMD Capital operates in 46 states, including Massachusetts, and offers a variety of loan programs. Their six distinct loan options include fix-and-flip loans, long-term rental loans, multi-family loans, new construction loans, bridge loans, and real estate-backed lines of credit.
Lending clientele: Residential and commercial real estate investors
Loan criteria: Varies by loan program
TMD Capital has received a 4.5-star rating on Google. Positive reviews highlight the company’s professionalism, expertise, and reasonable fees and rates. However, a few negative reviews mention instances where clients felt they were ghosted by their contacts at TMD Capital. “Theo and his team have closed multiple investment loans for me this year,” wrote one client. “Very responsive, reasonable fees/rates, and fast closings!”
800-571-7405
New Silver
Based in Brookline, New Silver provides real estate investment loans in 39 states, including Massachusetts. Founded in 2018, the company offers fix-and-flip loans, rental property loans, and ground-up construction loans. They specialize in financing non-owner-occupied properties in urban or suburban areas with 1–50 units. Closing times typically range from five to 10 days, though it may take longer depending on the property’s location.
Lending clientele: Residential real estate investors
Loan criteria: Varies by loan program
New Silver holds a 3.9-star rating on Google from over 30 reviews. Clients praise the company for its quick closings, prompt communication, and high loan-to-value ratios. However, some negative reviews highlight misleading information on their website and an unprofessional operator. “James and Amra are very professional, and I loved working with them,” reads a recent review. “If you are looking for a stress-free, quick close, go with them! They will be my go-to for my future deals moving forward.”
855-844-5626
Raymond C. Green Companies
Located in Boston, Raymond C. Green Companies offers short-term financing to real estate and construction professionals throughout New England. As a direct private lender, they provide nine different loan types, with amounts ranging from $100,000 to $10 million. All loans have a maturity of up to two years, and pre-approval letters are available upon request.
Lending clientele: Builders, developers, and real estate investors
Loan criteria: Up to 75% LTV
The Raymond C. Green Companies boasts a 5-star rating on Google from nearly 50 reviews. Clients praise their exceptional customer service, deep knowledge of the construction industry, and responsiveness to inquiries. “They have a thorough and honest approach which makes for seamless transactions,” wrote a former client. “Their willingness to structure loans around your needs and timelines is second to none.”
617-947-8070
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 Massachusetts?
Deciding whether a hard money loan is right for you depends on your unique situation and real estate investment goals. Hard money loans are best suited for in Massachusetts real estate investors who need fast, flexible funding for projects requiring quick turnaround or when traditional financing isn’t an option. If you can manage higher costs and shorter repayment terms, a hard money loan might be the right choice for your next investment.
For homeowners looking to leverage their equity without the high interest rates of hard money loans, HomeLight’s Buy Before You Sell program could be a better alternative. This program allows you to pay a small flat fee while benefiting from a more competitive offer and a smoother moving process.
As with any significant financial decision, it’s important to consider your long-term strategy and consult with a financial advisor. For those ready to connect with investor-friendly real estate agents in Massachusetts who have access to trusted hard money lenders, let HomeLight introduce you to top professionals in your area.
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