Do Hard Money Loans Require a Down Payment

Private loans are flexible and easy to use when you need short-term working capital, which is why they are popular with real estate investors and companies with real estate investments who need extra capital more generally. The question of down payments is not an easy one, though. Some lenders do offer zero down payment loans directly, in limited circumstances. More often, though, the loan has an LTV between 75 and 90%, and that can mean a down payment.

Options To Avoid a Down Payment

If you’re financing a new acquisition with a short-term private loan that is around 75% of its sale value, then you will need a down payment of some kind to close the deal or else you’ll need a new deal. There are a few options to make sure you don’t need to dig capital out of your reserves.

  • Finance a property you already own
  • Finance another asset like a trust
  • Use a dual bridge loan device to purchase the property
  • Use another credit instrument

The least expensive way to avoid down payments on hard money loans California is to simply finance a property with more equity in it than you require. If you’ve got long-term income properties or even a personal investment like a second home or vacation cottage, you can use the equity there to get your loan and then buy the new property. If you’re looking for a probate loan, you can usually find a hard money option with no down payment based on the value of the trust or one of its assets. Otherwise, you’ll need two financial instruments.

Financing With Two Loan Instruments

A dual bridge is the most common way to handle dual financing with hard money loans in California, but it’s not the only way. When you use a dual bridge loan, you take out a primary loan on the new acquisition at around 75% of its value, and then a smaller bridge loan against an existing investment like your home or business offices, to cover the amount that would normally be a down payment. This gives you full financing while balancing the risk for the lender.

You can also get to the same conclusion by mixing and matching loan products. Some investors choose to use a revolving credit line or an income-based cash advance for the smaller product, to avoid having to put up a stable investment as collateral.

Learn More About Hard Money Loans for Real Estate

There are a lot of reasons to get a bridge loan, beyond short-term investment. They are great for rehabbing and renovating existing income properties, for example. More importantly, though, they provide you with the working capital you need for major maneuvers like consolidating ownership during probate.

If you have questions about whether hard money loans will fit your current financing needs, talk to North Coast Financial private lenders for real estate to learn more about how hard money loans work in California. It’s also worth remembering that each lender’s program is a little different, so if you have looked at hard money loans as an option already, it is probably worth looking again with a new lender.

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