Securing financing is a crucial step in any real estate investment. Hard money lenders offer an alternative to traditional mortgages, but what kind of collateral do they accept? Let’s explore the possibilities:
- The Investment Property Itself: In most cases, the property you’re purchasing with the hard money loan serves as the primary collateral. The lender places a lien on the property, ensuring they recoup their investment if you default on the loan.
- Additional Investment Properties: If you own other investment properties free and clear of existing liens, you may be able to leverage them as additional collateral, potentially strengthening your loan application.
- Raw Land: Some hard money lenders may accept raw land as collateral, especially if you have a clear development plan that demonstrates the potential for future value creation.
- Other Valuable Assets: Depending on the lender and your circumstances, they might consider other valuable assets like stocks, bonds, or even cash deposits as supplemental collateral.
Matching Collateral to Your Needs
The type of collateral you use will depend on your specific situation and the property you’re targeting. Here are some additional considerations:
- Loan-to-Value Ratio (LTV): Hard money loans typically have higher LTV ratios compared to traditional mortgages. This means you might need to provide less cash upfront as a down payment, but the lender may require more robust collateral.
- Project Timeline and Exit Strategy: The type of collateral you offer might influence the loan terms. For example, using raw land as collateral might require a longer loan term to accommodate development timelines.
Consult with a Hard Money Lender
Understanding your collateral options is crucial for a successful hard money loan application. CoreLend Financial can help! Our experienced team can guide you through the process, assess your situation, and recommend the most suitable collateral options to achieve your real estate investment goals. Contact CoreLend Financial today to discuss your project and explore your financing options.
