There are a ton of benefits to owning California real estate. But one of the bigger drawbacks to owning property in California is that real estate isn’t very liquid. If you are a California homeowner that has accrued significant equity over the years, it can be frustrating not knowing how to properly leverage one of your biggest assets.
But how do you tap into your California home’s equity without having to sell or refinance? One of the best tools to accessing your home’s equity is through a hard money home equity loan. California hard money home equity lenders can offer hard money home equity loans that allow you to pull cash from your home’s equity that can be used for other financial purposes.
Hard money home equity loans are a little different than other traditional home equity solutions offered by institutional lenders such as banks and credit unions. In fact, there are several advantages to using a hard money home equity loan over other financing strategies.
There are several reasons to incorporate a hard money home equity loan into your real estate financing plan. If you are thinking about applying for a new hard money home equity loan, here is everything you need to know.
What is a Hard Money Home Equity Loan?
Hard money home equity loans are a specific type of mortgage solution available to California real estate owners. Hard money home equity loans are exclusively offered by hard money home equity lenders, meaning you cannot get one from a typical bank or credit union.
Hard money home equity lenders are private investors, businesses, or organizations that utilize an asset-based approach to mortgage lending. Using this methodology enables hard money home equity lenders to offer hard money home equity loans that are more advantageous than traditional home equity solutions marketed by institutions like banks and credit unions.
Borrowers use the proceeds from a hard money home equity loan to pay for large expenses or home renovations. Other uses include starting a business, funding retirement, paying off other high-interest debt, or investing in other California real estate opportunities.
How Does a Hard Money Home Equity Loan Work?
Hard money home equity loans work a lot like other types of real estate financing. They are considered secure loans because they use a borrower’s property as collateral to secure the loan.
Unlike a first mortgage, hard money home equity loans are considered a second mortgage solution. This means that your hard money home equity lenders will place a second lien (also known as a junior or subordinate lien) on your California property behind your primary mortgage.
Hard money home equity loans work by taking advantage of the available equity accrued in a property. You can calculate your available equity by adding up all the loans on a property and subtracting the combined balance from the property’s value.
Keep in mind that most California hard money home equity lenders allow a combined loan-to-value (CLTV) of 65%. That’s because California hard money home equity lenders require some equity in the property as a buffer in the event of default and foreclosure.
So how much money can you borrow with a hard money home equity loan? To get a rough idea, simply take 65% of your California property’s value and subtract your combined current loan balances outstanding on the property. The portion left over is how much you can reasonably expect to borrow.
Advantages of Using a Hard Money Home Equity Loan
Hard money home equity loans provide several key advantages over traditional home equity solutions. A few of the advantages to expect when applying for a hard money home equity loan include:
- Simplified Application Process
- Less Stringent Qualifying Criteria
- Flexible Loan Programs and Repayment Terms
- Faster Approval Decisions and Funding
Common Myths About Hard Money Home Equity Loans
Despite the significant advantages that hard money home equity loans provide, there are still several misconceptions about how hard money home equity loans really work. Let’s demystify some of the common myths surrounding hard money home equity loans.
Myth #1 – You need to refinance to get a hard money home equity loan
Lots of California borrowers think that in order to get a new hard money home equity loan they have to refinance their primary mortgage. That’s not the case, in fact this misconception can prevent homeowners from taking advantage of the benefits a hard money home equity loan can offer.
If you have a first mortgage on your California property, you can still qualify for a hard money home equity loan. That’s because hard money home equity loans can be placed as a second lien on your home behind your primary mortgage.
Utilizing a hard money home equity loan allows California property owners to retain the favorable repayment terms they may have on their property while still being able to tap into their home’s equity.
Myth #2 – You need good credit to qualify for a hard money home equity loan
Hard money home equity lenders use different criteria than traditional lenders to qualify California borrowers for hard money home equity loan.
Since hard money home equity lenders leverage an asset-based approach to mortgage lending, even those with poor credit can still qualify for a hard money home equity loan.
Having prior collections, missed payments, bankruptcies, or even foreclosures does not bar you from being able to take advantage of hard money home equity programs.
Myth #3 – You need to go through a rigorous application process
Traditional lenders, such as banks and credit unions, are known for imposing stringent restrictions on borrowers seeking mortgage financing. On average it can take between 30 and 60 days to get approved for a real estate loan through one of these entities.
Hard money home equity lenders offer flexible hard money home equity programs with fewer approval requirements. Because there are few requirements, the application process is much more streamlined, requiring less paperwork. You can expect an approval decision in minutes as opposed to months.
How to Obtain a Hard Money Home Equity Loan
Securing a hard money home equity loan is a fairly simple process. Nevertheless, you should have a full understanding of how hard money home equity loans work before you make any financial decision. Once you feel ready, here are the steps to obtain a hard money home equity loan:
Step 1 – Find a Reputable Hard Money Home Equity Lender
It’s important to find the right hard money home equity lender that can support your underlying financial objectives.
To find your next California hard money home equity lender, start by conducting some independent research. Look for local providers that have expert knowledge of the California real estate market. Pay close attention to past client reviews and testimonials.
Another way to find reputable hard money home equity lenders is by seeking referrals from other financial professionals such as real estate attorneys, investors, or settlement agents. Leveraging these resources can help you find the right hard money home equity lender for your situation.
Step 2 – Apply for a Hard Money Home Equity Loan
Once you have identified a reputable hard money home equity lender, review your lenders hard money home equity loan program requirements, and submit your hard money home equity loan application. The application process should be fairly quick and require minimal documentation.
Step 3 – Get Approved and Close
After submitting your hard money home equity loan application, you should receive a prompt approval decision from your hard money home equity lender. The next step is to communicate funding expectations and a closing timetable.
Once a closing date has been established, all you will need to do is sign your closing documents, receive your hard money home equity loan proceeds, and repay your hard money home equity loan based on the terms agreed upon.
Hard Money Home Equity Lenders, Independent Lending
There are many benefits to securing a hard money home equity loan. But what is equally important is working with a reputable hard money home equity lender that can help navigate you through the hard money home equity loan process.
Independent Lending is California’s preferred hard money home equity loan lender. Whether you are looking to consolidate debt or purchase another California property, Independent Lending has the flexible hard money home equity loan programs to help support your financial objectives.
With over 40 years of combined mortgage industry experience and hundreds of 5-star client reviews on Google and Zillow, Independent Lending is the obvious choice for your hard money home equity needs. Check us out online or contact us today to discover how we can help save you time and provide peace of mind with our unique hard money home equity loan programs!
