Hard Money Lenders Philadelphia: Quick Real Estate Loans
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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.
Dreaming of revitalizing a historic property in Old City or flipping a one-bedroom condo in Chinatown? Hard money lenders in Philadelphia provide an effective financing option for your next real estate venture. With a focus on property value rather than credit scores, hard money loans offer a streamlined path to funding, perfect for those needing quick turnarounds.
In this article, we’ll explore the ins and outs of hard money lending in Philadelphia, from understanding the basics to evaluating costs and alternatives. Whether you’re a seasoned investor or a homeowner seeking fast cash, this guide will help you navigate the world of hard money loans to achieve 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.
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 provides short-term loans secured by real estate, with a primary focus on the property’s value rather than the borrower’s creditworthiness. These lenders typically work with real estate investors, such as house flippers and buyers of rental properties.
Hard money lenders determine the loan amount using the after-repair value (ARV), which is the estimated worth of the property after renovations. They lend a percentage of this ARV to safeguard their investment. The loans come with higher interest rates, typically between 8% to 15%, and shorter terms, usually from 6 to 24 months. Additional costs include origination fees, closing costs, and points. If a borrower fails to repay, the lender can take possession of the property to recover their funds.
How does a hard money loan work?
Hard money loans offer a fast and flexible financing route for real estate investments in Philadelphia. Here’s how they typically work:
- Short-term loan: These loans have shorter repayment periods, typically ranging from 6 to 24 months, unlike 15- or 30-year conventional mortgages.
- Faster funding option: Approval can be completed in days, a stark contrast to the usual 30 to 50 days for traditional mortgage loans.
- Less focus on creditworthiness: Hard money lenders prioritize the property’s value over the borrower’s credit score.
- More focus on property value: The loan amount is determined by the loan-to-value ratio of the property used as collateral.
- Not traditional lenders: These loans are provided by private individuals or companies, not by traditional banking institutions.
- Loan denial option: They are a go-to for those who have been denied mortgages but have considerable home equity.
- Higher interest rates: These loans come with higher interest rates due to the increased risk to the lender.
- Might require larger down payments: Borrowers may need a larger down payment, often ranging from 20%–30% of the property’s value.
- More flexibility: With less regulation, hard money lenders can offer more flexible terms regarding credit scores and debt-to-income ratios.
- Potential for interest-only payments: Borrowers might have the option for interest-only or deferred payments initially, providing more flexibility in cash flow management.
What are hard money loans used for?
Hard money loans are tailored to meet specific financial needs in Philadelphia’s real estate market. They’re perfect for investors and homeowners who need quick, flexible funding options. Let’s look at some common situations where hard money loans are used:
Flipping a house: Philadelphia house flippers benefit from the rapid access to funds that hard money loans offer. These loans help investors purchase and renovate properties quickly, ensuring a faster turnaround for selling.
Buying an investment rental property: Investors looking to acquire rental properties can use hard money loans to quickly secure properties, especially those that need renovations. This speeds up the process of preparing the property for tenants and generating income.
Purchasing commercial real estate: The flexibility and fast approval of hard money loans are beneficial in commercial real estate deals. Investors can quickly secure properties, taking advantage of time-sensitive opportunities without the delays of conventional financing.
Borrowers who can’t qualify for traditional loans: Individuals with significant home equity but poor credit can turn to hard money lenders. These loans prioritize the asset’s value over the borrower’s credit score, making them accessible to those who might be turned away by banks.
Homeowners facing foreclosure: Hard money loans offer a lifeline to homeowners facing foreclosure. They can refinance their debt or gain time to sell their property, avoiding foreclosure and its impact on their credit score.
How much do hard money loans cost?
Hard money loans tend to have higher costs due to the increased risk and convenience they offer. Here’s a breakdown of typical costs:
- Interest rates: These range from 8% to 15% or more, reflecting the lender’s risk assessment.
- Origination fees: Expect to pay 1% to 5% of the loan amount in origination fees.
- Closing costs: Additional fees at closing may include legal fees, appraisal fees, and administrative costs.
- Points: Lenders often charge points (a percentage of the loan amount) upfront, adding to the overall cost.
Using online calculators can help you estimate the total cost of a hard money loan.
Alternatives to working with hard money lenders
For homeowners looking to access their home’s equity, here are some financing alternatives to consider:
Take out a second mortgage: A home equity loan or HELOC can provide the funds you need, often at lower interest rates than hard money loans.
Cash-out refinance: Refinancing your current mortgage to pull out cash can help fund new investments, usually offering lower interest rates than hard money loans.
Borrow from family or friends: A personal loan from family or friends can come with flexible terms and possibly lower interest rates, making it an affordable option.
Use a government-backed loan program: Programs like FHA, VA, or USDA loans can help with home purchases by offering lower down payments and interest rates.
Peer-to-peer loans: Loans from individual investors via platforms like Funding Circle can provide funding similar to hard money loans but often with different terms.
Specialized loan programs: Specialized loans for fixer-uppers or refinancing investment properties are useful if you need to replace an existing hard money loan.
Request a seller financing option: Sometimes, sellers may offer to finance the purchase, which can lead to lower closing costs and less stringent eligibility criteria.
How to buy before you sell
HomeLight’s Buy Before You Sell program is a game-changer for homeowners who want to buy a new home before selling their current one. This program allows you to leverage the equity in your existing home, making a non-contingent offer on your next property, whether it’s a renovated townhouse near Fishtown or a stone-fronted single-family home in East Mt. Airy.
If your home qualifies for BBYS, 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, simplifying the moving process and potentially increasing its market value.
Here’s how HomeLight Buy Before You Sell works:
The cost is a flat fee of 2.4% of your current home’s sold price. While this fee might seem significant, the savings in other areas — like avoiding temporary housing costs, moving expenses, and securing a better purchase price for your new home — can easily outweigh it. Plus, HomeLight’s BBYS fees are usually lower than bridge loan interest rates, which range from 9.5% to 12%.
3 top hard money lenders in Philadelphia
Traditional lenders aren’t always the best fit for every real estate investment. If you need to act quickly to take advantage of a valuable opportunity, consider these top-rated hard money lenders in Philadelphia.
Direct Mortgage Loan Company
Based in Philadelphia, Direct Mortgage Loan Company lends on acquisition, rehab projects, and new construction. The company was founded in 1956 and has funded over 1,000 loans totaling around $250 million in just the past five years. They work with real estate developers and investors in Philadelphia, Southeastern Pennsylvania, and New Jersey, offering a variety of loan programs, including flip/rehab loans, new construction loans, acquisition loans, bridge loans, cash-out/refinance loans, and more. Among the eligible property types are single-family, multifamily, mixed-use, commercial, and raw land. Closings typically happen within two weeks, and loan terms range from four to 15 months.
Lending clientele: Commercial and residential real estate investors and developers
Loan criteria: Typically up to 75% LTV or 70% LTARV
Direct Mortgage Loan Company has a 4.8-star rating on Google based on nearly 50 reviews. Clients commend their speed, professionalism, and transparency. “Another fast, painless closing thanks to Direct Mortgage,” wrote one reviewer. “Everyone there is extremely competent. They are fast (closes in days), absolutely easy to work with, and fair.”
215-844-1200
Legacy Capital
Ambler-based Legacy Capital was founded by active investors with over 35 years of experience. They offer hard money loans to fund all types of real estate projects, from fix-and-flips to rehab projects, rental property repositioning, and commercial. The company works with real estate investors (non-owner occupancy only) and considers projects involving single-family rentals, duplexes, triplexes, fourplexes, condos, townhouses, and multifamily properties. To get started, simply fill out the short online form, and they’ll get back to you within 24 hours.
Lending clientele: Residential real estate investors
Loan criteria: LTV cannot exceed the lesser of 60% or 80% of the purchase price
Legacy Capital has earned a 4.8-star rating on Google from over 20 reviews. Clients praise the staff for being detail-oriented, knowledgeable, and prompt in their responses. “[Legacy Capital] cares about their clients, and it shows,” shared a former client. “They have a fast, smooth, and easy process for closing and are very responsive and knowledgeable about the real estate market. The documents and wire are always on time.”
215-600-3419
i Fund Cities
i Fund Cities is a lending platform that provides loans to residential real estate investors nationwide. The company has been around since 2018 and is headquartered in Philadelphia. They offer seven different loan programs, including build-to-rent, fix-and-flip, fix-to-rent, new construction, multifamily, portfolio rental, and rental. i Fund Cities lends on single-family homes, townhomes, condos, multifamily (5 or more units), and single-family rental portfolios (up to 200 units). Note that they do not fund properties that are designated as rural. Loans can close in as little as seven days if all the paperwork is in order.
Lending clientele: Residential real estate investors
Loan criteria: Up to 80% LTV (fix-and-flip and fix-to-rent), up to 70% LTV (multifamily bridge), up to 65%–70% LTV (multifamily rental), up to 80% LTV (new construction and build-to-rent), up to 75%–80% LTV (rental and portfolio rental)
i Fund Cities has a 4.5-star rating on Google based on over 50 reviews. Borrowers highlight their willingness to answer questions, quick closings, and competitive rates. “My husband and I have worked with i Fund Cities for a couple of years now,” reads a recent review. “Each time we’ve worked with them, it has been a great experience. Everyone is professional and knowledgeable and works cohesively to get our loans completed.”
215-770-1505
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 Philadelphia?
Choosing whether a hard money loan is right for you depends on your specific real estate investment goals and financial situation. Hard money loans are ideal for Philadelphia investors who need quick access to funds and can manage higher interest rates and shorter repayment periods. These loans are particularly beneficial for time-sensitive projects or those unable to secure traditional financing.
For homeowners aiming to leverage their home equity without incurring high interest rates, HomeLight’s Buy Before You Sell program is a viable alternative. This program charges a flat fee and helps you make competitive, non-contingent offers.
Before making a decision, consider your long-term financial strategy and consult a financial advisor. If you’re seeking investor-friendly real estate agents in Philadelphia with access to reliable hard money lenders, HomeLight can connect you with top professionals who can guide you through your options.
Header Image Source: (E. Vitka / 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)
- "Why Do Hard Money Lenders Require A Down Payment?," RCN Capital (April 2024)
- "A Comprehensive Guide to Common Terms Used in Hard Money Lending," LinkedIn, Joseph Walker (September 2023)
- "What are Points on a Hard Money Loan?," LinkedIn, Blaise Brewer (December 2021)
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