A hard money loan is financing for investment property that is approved on the property and the deal instead of on the borrower’s income. In a market as fast as Boston’s, that difference is often what gets an offer accepted.
Speed
Because the loan is underwritten on the collateral, there is no long review of tax returns and employment. Fix and flip loans average up to 21 days and can close in about 7 days when title and insurance are ready.
Flexibility
Each deal is looked at on its own numbers. Terms range from 6 months for a quick flip to 30 years for a rental you plan to keep.
How the loan amount is set
- On a purchase and renovation, it is based on the price, the rehab budget and the after-repair value.
- On a rental, it is based on the property’s value and whether the rent covers the payment.
- On new construction, it is based on the project cost and the completed value.
The trade-off
Hard money costs more than a conventional bank mortgage. The rate is higher because the lender moves quickly and takes on more risk. Investors accept that for speed, for leverage on the renovation, and for approval that does not depend on their personal income. The loan is meant to be a tool for a specific plan, with a clear exit by sale or refinance.
Programs for Boston investors
| Program | Maximum leverage |
|---|---|
| Fix and flip | Up to 90% of purchase and 100% of rehab, capped at 70 to 75% of after-repair value |
| DSCR rental | Up to 85% loan-to-value on a purchase, up to 80% on a cash-out refinance |
| New construction | Up to 90% of cost for experienced builders, capped at 70 to 75% of completed value |
Credit
Credit matters less than with a bank, but it still affects leverage and pricing. Programs start at a 600 score, and the best fix and flip terms are for scores of 720 and above.
Why work with us
Loans are pre-underwritten in-house so they fund correctly the first time. If you have a competing offer, show it to us and we will tell you plainly whether we can beat it.
See how this works in specific neighborhoods on our Boston page, or send us a deal.