In Jacksonville, securing the right financing is important, especially if you’re an investor looking for a flexible loan option. That’s where a hard money loan might come in handy. Whether you’re flipping homes in neighborhoods like Riverside or purchasing investment properties near San Marco, these loans offer quicker funding and more adaptable terms than traditional mortgages. However, they also come with higher costs and specific qualifications.
In this guide, we’ll break down what hard money lenders do, the loan process, common uses, and costs. We’ll also compare alternative financing options to help you determine if a hard money loan is the best fit for your real estate goals.
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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, typically secured by real estate, for those who may not qualify for traditional financing. These lenders usually work with clients like house flippers or investors purchasing rental properties. Instead of focusing on credit scores, they determine loan amounts based on the property’s after-repair value (ARV), which is the estimated value of a property after renovations.
Hard money loans often come with higher interest rates and fees than traditional loans due to their higher risk and quicker turnaround times. Borrowers are expected to repay the loan within a short period, usually one to three years. If a borrower fails to repay, the lender may take possession of the property used as collateral.
How does a hard money loan work?
In Jacksonville, hard money loans are structured differently from traditional loans, offering borrowers quicker access to capital but with certain trade-offs. Here’s how they generally work:
- Short-term loan: Hard money loans are typically designed for short-term use, usually lasting between six months and three years, giving borrowers time to flip a property or complete a project.
- Faster funding option: These loans can be funded much faster than traditional mortgages, sometimes in just a few days, which is ideal for competitive markets like Jacksonville.
- Less focus on creditworthiness: Unlike traditional lenders who rely heavily on your credit score, hard money lenders focus more on the value and potential of the property you’re buying.
- More focus on property value: Loan amounts are often based on the loan-to-value ratio or ARV, making the property’s potential more critical than your financial history.
- Not traditional lenders: Hard money lenders are usually private individuals or companies, not traditional banks, offering more flexibility but often at a higher cost.
- Loan denial option: While faster and more flexible, hard money lenders may still deny loans if they believe the project or property has too much risk.
- Higher interest rates: These loans usually come with higher interest rates, typically ranging from 8% to 15%, reflecting the increased risk for lenders compared to a 30-year traditional mortgage.
- Might require larger down payments: Hard money lenders may require down payments between 20%–30%, depending on the risk associated with the property and borrower profile.
- More flexibility: Lenders may allow for different repayment structures, such as interest-only payments, giving borrowers flexibility in their cash flow during the loan period.
- Potential for interest-only payments: Some hard money lenders offer interest-only payment options during the loan term, which can lower your initial monthly payments but require a larger final payment when the loan term ends.
What are hard money loans used for?
Hard money loans serve a variety of purposes in the real estate world, often providing fast access to capital for projects that traditional lenders may hesitate to fund. Here’s a look at some common uses for hard money loans.
- Flipping a house: Hard money loans are popular with those flipping homes. The quick funding allows flippers to purchase properties, complete renovations, and resell them within a short period.
- Buying an investment rental property: Investors often use hard money loans to buy rental properties, especially when they need to act quickly in competitive markets or are targeting properties that require significant repairs.
- Purchasing commercial real estate: For those eyeing commercial real estate, a hard money loan can provide the fast funding needed to secure properties before they hit the broader market, especially in high-demand areas.
- Borrowers who can’t qualify for traditional loans: If you’re unable to secure a traditional loan due to credit issues or other financial hurdles, a hard money loan can be an alternative route to financing.
- Homeowners facing foreclosure: Homeowners at risk of foreclosure may turn to hard money loans to quickly access funds to cover their debts, giving them a chance to avoid losing their home.
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 a homeowner or investor looking for other ways to finance your real estate goals in Jacksonville, there are several options beyond hard money loans:
- Take out a second mortgage: If you have substantial equity in your home, a home equity loan or home equity line of credit (HELOC) can provide the needed 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. It often comes with lower interest rates than hard money loans.
- Borrow from family or friends: A personal loan from family or friends can offer flexible repayment terms and potentially lower or no interest rates, making it a more affordable option.
- 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, functioning similarly to hard money loans but often with different terms.
- Specialized loan programs: Consider specialized loans 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, which can result in lower closing costs and less stringent eligibility requirements.
How to buy before you sell
HomeLight’s Buy Before You Sell program offers a seamless solution for homeowners who need to purchase a new home before selling their current one. This program allows you to make a competitive, non-contingent offer on your next home while avoiding the stress of timing the sale and purchase 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 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 Jacksonville
Hard Money Lenders IO
Hard Money Lenders IO is a private lending company based in Florida. It specializes in real estate loans for investors and entrepreneurs. Established to cater to professional investors, the company offers business-purpose loans exclusively for non-owner-occupied real estate investments.
Lending clientele: Real estate investors and entrepreneurs
Loan criteria: 75% loan to ARV
Hard Money Lenders IO has a 4.9-star rating on Google, based on 22 reviews. Past clients commend Hard Money Lenders IO for providing a smooth and easy process, with loans delivered in less than 2 weeks.
GoKapital
GoKapital is recognized as one of the leading private hard money lenders in the United States. It offers specialized mortgage solutions for seasoned and novice real estate investors.
Lending clientele: Real estate investors and entrepreneurs
Loan criteria: Up to 75% LTV and 100% of renovation costs
GoKapital has a 4.4-star rating on Google based on 40 reviews. Previous clients praise them for their professionalism and reliability.
886-257-2973
Benworth Capital
Benworth Capital, established in 2008 amidst the global financial crisis, offers an alternative financing source to traditional banks. Benworth specializes in private or “hard money” loans, focusing on real estate’s significant role in economic stability and personal wealth.
Lending clientele: Real estate investors, homeowners, and international borrowers
Loan criteria: Up to 65% LTV
Benworth Capital has a 4.7-star Google rating based on over 2,000 reviews. Reviewers praise Benworth Capital for transparency and flexibility.
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 Jacksonville?
Working with a hard money lender in Jacksonville depends on what you’re trying to achieve with your real estate investment. These loans are ideal for investors who need fast funding for projects like flipping homes, buying rental properties, or securing commercial deals. They provide the speed and flexibility traditional lenders don’t offer but come with higher interest rates and shorter loan terms.
For Jacksonville homeowners who are simply looking to access equity or transition to a new property, HomeLight’s Buy Before You Sell program may be a more attractive option. It allows you to buy a new home before selling your current one, all without the stress of managing two mortgages or the high costs associated with hard money loans.
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