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Hard Money Lenders Long Island: Alternative Financing Options
HomeLight
Real Estate
2 months ago
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Looking to fund your next real estate project on Long Island with a hard money loan? Whether you’re flipping a beach bungalow in the Hamptons or investing in a rental near Huntington, hard money lenders on Long Island offer quick, flexible financing options that traditional lenders might not provide. These loans can be a game-changer for projects with tight timelines, limited initial capital, or credit hurdles.

If you’re not in the investment game but need a solution to bridge the gap between buying and selling a home, we’ll also explore alternatives to help leverage your home’s equity.

This guide will walk you through hard money lending in Long Island, providing insights to help you determine if this option fits your real estate ambitions.

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What is a hard money lender?

A hard money lender is a private individual or company that offers short-term loans secured by real estate. Unlike traditional lenders that focus on credit and income, hard money lenders in Long Island prioritize the property’s value. Their clients often include house flippers and those investing in rental properties, needing fast, flexible financing.

Hard money lenders use the after-repair value (ARV)—the estimated value of a property post-renovation—to determine loan amounts, often lending a percentage of this ARV.

Interest rates on hard money loans typically range from 8% to 15%, with additional costs like origination fees and points. If a borrower fails to repay, the lender can seize the property to recoup their investment.

How does a hard money loan work?

If you’re exploring alternative financing for your real estate project on Long Island, a hard money loan might be the solution. Here’s a breakdown of how these loans work:

  • Short-term loan: These loans typically have a repayment period of 6 to 24 months, unlike a 30-year mortgage. Some lenders might extend up to 36 months, offering some flexibility.
  • Faster funding option: Hard money loans can be approved within days, perfect for quick closings. In contrast, traditional mortgage approvals can take 30 to 50 days.
  • Less focus on creditworthiness: Approval is less reliant on your credit score. Instead, lenders look more at the property’s potential value.
  • More focus on property value: Hard money lenders base the loan amount on the loan-to-value ratio of the property, using it as collateral for the loan.
  • Not traditional lenders: These loans are usually provided by private investors or companies rather than banks. They offer an alternative for those who may not fit the mold of traditional lending criteria.
  • Loan denial option: Hard money loans are often used by those who have been denied a mortgage but have substantial home equity.
  • Higher interest rates: Due to the higher risk, hard money loans come with higher interest rates compared to traditional mortgages.
  • Might require larger down payments: Borrowers may need to make a larger down payment, sometimes up to 20%–30%.
  • More flexibility: Hard money lenders can set more flexible terms, including less stringent debt-to-income ratios and fewer regulations.
  • Potential for interest-only payments: Some hard money loans offer interest-only payment options, making them more manageable during the initial phase of a project.

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