Finding the right financing for real estate investments can be challenging in Columbia, S.C. If you’re looking for a flexible and fast way to secure funds, a hard money loan might be your answer. These loans can be particularly useful in a vibrant market like Columbia, where opportunities can arise quickly, and traditional loan processes may not keep up with the pace.
Whether you’re a seasoned investor eyeing a fixer-upper in Shandon or a homeowner in Rosewood facing foreclosure, understanding how hard money loans work can empower you to make informed financial decisions. This guide will cover everything from what a hard money lender is to the costs associated and alternatives you might consider.
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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 offers short-term loans secured by real estate. Unlike traditional lenders, hard money lenders focus on the property’s value rather than the borrower’s credit history. They typically work with house flippers, developers, and real estate investors who need quick access to funds.
Loan amounts are often determined by the after-repair value (ARV), which is an estimate of the property’s value after renovations. ARV helps lenders assess the potential profitability of the investment.
Due to the increased risk, interest rates for hard money loans are generally higher than traditional loans, and fees can be substantial. If a borrower fails to repay the loan, the lender can foreclose on the property, making these loans a serious commitment.
Additional costs can include origination fees, closing costs, and points, which are a percentage of the loan amount paid upfront.
How does a hard money loan work?
If you’re a real estate investor looking for a financing option that provides speed and flexibility, connecting with hard money lenders in Columbia could be a good move. Here’s a quick rundown of how hard money loans work:
- Short-term loan: These loans usually have a 6–24 months repayment period, unlike the 15- or 30-year terms of conventional mortgages. Some lenders may extend the term up to 36 months if needed.
- Faster funding option: When you need to close a deal quickly, hard money loans can be approved within days, compared to the 30 to 50 days typical for a mortgage loan.
- Less focus on creditworthiness: Approval relies less on your credit score or income history and more on the property’s value.
- More focus on property value: These loans require collateral, such as a home, and are based on the loan-to-value ratio of the property.
- Not traditional lenders: Individual investors or private lending companies usually provide hard money loans, not traditional banks.
- Loan denial option: These loans are often used by those with poor credit who have been denied a mortgage but possess significant home equity.
- Higher interest rates: Due to higher risk, these loans have higher interest rates than traditional mortgages.
- Might require larger down payments: Borrowers may need to provide a larger down payment, sometimes up to 20%–30%, depending on the property’s value and loan specifics.
- More flexibility: With less government regulation, hard money lenders in Columbia can set flexible credit scores and debt-to-income (DTI) criteria, and 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.
What are hard money loans used for?
Hard money loans can address specific financing needs in the Columbia real estate market. They’re often used by investors who need fast funding or may have difficulty qualifying for traditional bank loans.
Here are some common use cases:
- Flipping a house: Ideal for flipping homes, where quick funds are needed to purchase, renovate, and sell properties for profit.
- Buying an investment rental property: Useful for acquiring rental properties quickly, allowing investors to capitalize on market opportunities.
- Purchasing commercial real estate: Enables investors to secure commercial properties that traditional lenders might not finance due to perceived risks.
- Borrowers who can’t qualify for traditional loans: Provides an alternative for those with less-than-perfect credit or unconventional income sources.
- Homeowners facing foreclosure: Offers a lifeline to those at risk of losing their homes, allowing them to tap into home equity for necessary funds.
How much do hard money loans cost?
Hard money loans generally cost more than traditional loans due to the higher risk for lenders and the convenience of quick, flexible funding. Typical costs include:
Online calculators can help estimate these costs.
Alternatives to working with hard money lenders
If you’re considering other financing options or a hard money loan doesn’t work for you, here are a few alternatives to explore:
- Take out a second mortgage: A home equity loan or home equity line of credit (HELOC) can provide funds at a lower interest rate compared to a hard money loan.
- Cash-out refinance: This option allows you to refinance an existing property, pulling out cash to finance your new investment, often with lower interest rates.
- 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: Programs offered by the FHA, VA, or USDA can help buyers purchase homes with lower down payments and reduced interest rates.
- 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.
- Specialized loan programs: Specialized loans can be used for fixer-uppers or investment property refinancing if you already have a hard money loan and seek to replace it.
- Request a seller financing option: In some 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
HomeLight’s Buy Before You Sell program is designed to help homeowners buy a new home before selling their current one. This program allows you to secure your dream home without the stress of timing both transactions perfectly.
The Buy Before You Sell (BBYS) program allows you to leverage the equity in your existing home to make a stronger, non-contingent offer on a new property. If your home qualifies, you can get your equity unlock amount approved in 24 hours or less, with no cost or commitment required. Once approved, you can 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 you could see 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. On top of that, 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 Columbia SC
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 Columbia’s hard money lending options.
Carolina Capital Management
Carolina Capital Management specializes in providing hard money loans for real estate investors. The company offers a range of loan programs including fix and flip loans, rental property loans, and commercial loans. Carolina Capital can close loans quickly, often within 7-10 days, ensuring fast and reliable funding solutions for investors.
Lending clientele: Residential and commercial real estate investors
Loan criteria: LTV up to 70% of ARV
Carolina Capital has earned a 5.0-star rating on Google and an A+ rating on Better Business Bureau (BBB), with several reviews. Reviews note the company’s professional team, efficient process, and reliability.
BridgeWell Capital
BridgeWell Capital specializes in providing hard money loans to real estate investors. They offer a range of loan programs, including fix and flip, rental, and cash-out refinance loans.
Lending clientele: Residential and commercial real estate investors
Loan criteria: LTV 60% up to 80% of ARV
BridgeWell Capital has earned a 4.7-star rating on Google based on over 120 reviews. Clients frequently highlight the company’s responsive customer service, efficient loan process, and professionalism.
Lima One Capital
Although not based in Columbia, Lima One Capital is a private lending company that offers hard money loans for real estate investors nationwide. They have funded over 28,000 projects, totaling more than $9 billion. Their loan programs include fix-and-flip/bridge, new construction, rental, short-term rental, and multi-family.
Lending clientele: Residential, commercial, and development investors
Loan criteria: Up to 75% LTV (fix-and-flip), up to 80% LTV (bridge), up to 70% LTV (new construction), up to 80% LTV (rental), up to 70%–75% (short-term rental)
Lima One Capital has earned a 4-star rating on Google based on nearly 200 reviews. Clients frequently commend the company for its efficient processes, frequent communication, and professional staff.
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 Columbia?
The decision to use a hard money lender in Columbia should be based on your individual situation and real estate investment goals.
For homeowners looking for a more cost-effective and less stressful alternative, HomeLight’s Buy Before You Sell program could be the perfect solution. This program allows you to buy your new home before selling your current one, providing peace of mind and avoiding the pressure of tight timelines. With competitive rates and a streamlined process, it’s an excellent option for those looking to transition smoothly into their next home.
As with any major financial decision, consider your long-term strategy and consult with a financial advisor to make sure it aligns with your overall investment goals. If you’re looking to connect with investor-friendly real estate agents in Columbia who have access to trusted hard money lenders, let HomeLight introduce you to top professionals in your area who fit that criteria.
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