Refinance Out Of A Hard Money Loan!

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
San Diego, California
I've never been a big fan of Hard Money loans but they have been a hot program for high net worth individuals either purchasing primary residences, multi-family units or other investment properties. Throughout this article I’m going to explain why you shouldn't go hard money and there are options out there with much better terms available.

Hard Money loans usually come with an extremely high interest rate anywhere from 9-15% interest. On top of the high interest rate they usually require a large amount down (sometimes even 50%). They are also usually short term financing where you would have to pay off the loan within a certain amount of years.

In my mind this is absolutely ridiculous and I would never even consider going this direction. Now that doesn’t mean these loans don’t make sense for some borrowers, they sometimes do! I have clients that are profiting more than 10,000.00+ on top of what their hard money loan payment is on some properties.

Why do people usually get Hard Money Loans? Typically they are in a situation where they had a previous economic event that prevents them from obtaining traditional financing. They could also be in a situation where their tax returns don’t show a significant amount of money being made after expenses.

What is the benefit of Hard Money Loans? In my mind there is no benefit but there still are circumstances where someone may only qualify for this type of loan.

How do you avoid Hard Money Loans or Refinance Out of a Hard Money Loan? This is the fun part that I will be explaining below!

We recently have launched a program that is RISK-BASED underwriting vs. automated underwriting which has a computer generated result. Risk based underwriting analyzes the risk of both you as the borrower and the property that is in need of financing. There is actually a human that makes the decision of whether or not the new loan makes sense.

What are the Requirements for this loan?
  • Minimum loan size: 100,000.00
  • Maximum Loan-to-Value: 95%
  • Interest Rates: Varies depending on how long ago your economic event was, credit score and occupancy. Please call 619-379-8999 for a rate quote.
  • Terms: 5/1 ARM, Amortized over 30 years. This is made as a short term product to allow you time to obtain traditional financing in the near future but is still much better than a hard money loan altogether.

Here are some of the questions we ask to determine if you’re eligible:
  • Primary, second home, or investment?
  • Property type?
  • Property address?
  • Primary wage earners middle Credit score(if any credit issues please provide credit report and LOE)?
  • Loan amount(reminder we have a $300,000 minimum loan amount)?
  • Purchase, rate and term or cash out?
  • (If Cash out, what’s the existing lien and how much cash out?)
  • Appraised Value and or Purchase price?
  • How much liquid reserves will they have after close (and down payment for purchase transactions)…remember we are an asset based lender. The more $ the better…..?
  • Do they need to use assets to help them with DTI (asset depletion)?
  • Do they need to use assets help with LTV constraints (pledge assets)?
  • Foreign national borrower or Borrower needs foreign income to qualify that is not claimed on US taxes?
  • What is the reason the loan is going this direction? (take your time this question. Give my underwriter enough information for her to make a decision so you don’t have any problems when the file gets here)?
  • Compensating factors?

If you would like to find out more about this program please feel free to reach out to me directly at: [email protected] or 619-379-8999. I would be happy to send your information in to the underwriting department to determine if we can approve your new loan. I typically will get an answer back same day and 99% of the loans approved by the VP of underwriting will go through as long as the information we submit is accurate.

You can also fill out an online application here at
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