Hard Money Lenders New Haven, CT

Hard money lenders are asset-focused financial providers that operate outside the constraints of conventional banking institutions. Although both types of lenders issue mortgage loans, the requirements and approval processes differ substantially between them. Hard money lenders analyze the collateral property as the primary factor, which dramatically shortens the underwriting timeline. Because of this, funding is often completed within a week, unlike traditional banks that can take several months or more to approve a loan.

Many real estate investors, especially those buying foreclosures at live auctions, rely on hard money financing due to the rapid closing timelines required. These lenders can also offer funding for properties that banks categorize as unfinanceable, including those without a Certificate of Occupancy or requiring major repairs. Borrowers with low credit scores can benefit as well, since FICO scores are not the deciding factor, and these loans can also be used for refinancing or taking cash out of an existing property.

As one of the trusted hard money lenders in New Haven, CT, our goal is to help investors obtain the necessary capital for a variety of real estate projects.

New Haven, CT hard money loans are faster to obtain than traditional bank mortgages, but interest rates are higher, usually between 10% and 12%, plus 2 points at closing. The loan term is typically 1 to 2 years, perfect for short-term projects  and can come in two parts:

1. Funds for the purchase, typically cover 70 to 85% of the purchase price.
2. Funds for rehab, if necessary, which may cover up to 100% of the renovation costs.

When a property requires rehab, funds from a hard money loan are typically disbursed in arrears, meaning that funds are released after a portion of the work has been completed. For example, if a borrower is allocated $50,000 for rehab, they might complete $15,000 worth of improvements before requesting that amount from the lender, and the process continues until the rehab is finished. Hard money loans are commonly used for bridge loans, fix-and-flip projects, and commercial real estate financing, and are structured to ensure that the total amount, including both the purchase price and rehab costs, doesn’t exceed 65% of the property’s after-repair value (ARV). Investors in competitive markets like New Haven, CT often turn to hard money loans because they provide fast access to funding, allowing them to close deals quickly and efficiently.

Since a hard money loan is categorized as a commercial loan, it can only be issued to an LLC, not directly to an individual borrower. If you don’t already have an LLC, creating one is easy and can be done with just one member, which could be you. This makes the process of securing financing via a hard money loan simple for most real estate investors.

Hard money lenders assess both the purchase price and the after-repair value (ARV) of a property to ensure that they can recover their loan. Buying property at or below market value is a key factor in securing the loan, as it ensures that the lender’s risk is minimized. If rehab funds are part of the loan, the lender will want to ensure that the repairs are completed according to the agreed schedule. A clean title is also crucial; if there are any liens or judgments on the property or LLC, they must be resolved before funds are disbursed.

Hard money lenders want to see that the borrower is entering into a profitable investment project. They prefer to work with borrowers whose investments will yield enough profit to cover all costs, including purchase, rehab, and financing fees, leaving room for a financial gain. The lender wants to ensure that there is enough “spread” in the deal to make it beneficial for the borrower and secure repayment for themselves.

Hard money lending is commonly used by New Haven, CT real estate investors in the following scenarios:

• To purchase and repair a property (including rental properties) that a traditional bank will not lend on (either because of the property itself or because of the borrower’s credit), which will then be sold to a retail buyer. This is commonly called “fix and flip.”
• To purchase and repair a property that a bank will not lend on, which will then be rented out. Once rented, the property will be considered “stabilized,” and may be refinanced with a traditional bank at a lower rate.
• To fund real estate purchases that need to be done in a timeframe that a traditional bank cannot meet (for example, a foreclosure auction). While a hard money lender can often fund the purchase within a week, a bank may take 2 or 3 months or longer.
• To obtain a fast cash-out refinancing using an already-owned property as collateral.
• To quickly refinance another mortgage on the property that is coming due.