Online calculators can help estimate these costs.
Alternatives to working with hard money lenders
If you’re a homeowner, rather than an investor, who is looking for a way to leverage your current home’s equity, here are a few options to consider:
Take out a second mortgage: If you have substantial equity in your home, a home equity loan or home equity line of credit (HELOC) can provide the needed funds at a lower interest rate compared to a hard money loan.
Cash-out refinance: This option allows you to refinance an existing property, pulling out cash to finance your new investment. It often comes with lower interest rates than hard money loans.
Borrow from family or friends: A personal loan from family or friends can offer flexible repayment terms and potentially lower or no interest rates, making it a more affordable option.
Use a government-backed loan program: Programs offered by the FHA, VA, or USDA can help buyers purchase homes with lower down payments and reduced interest rates.
Peer-to-peer loans: These loans are provided by individual investors through lending platforms like MeridianLink or Funding Circle. They function similarly to hard money loans but often have different terms.
Specialized loan programs: If you already have a hard money loan and want to replace it, consider specialized loans for fixer-uppers or investment property refinancing.
Request a seller financing option: Sometimes, sellers may agree to finance the purchase, resulting in lower closing costs and less stringent eligibility requirements.
How to buy before you sell
Sometimes, the perfect listing pops up when you’re least expecting it. Maybe it’s a rare mid-century modern home or a two-bedroom condo within walking distance of your job.
If you’re a Minnesota homeowner wanting to buy a new home before selling your current one, HomeLight offers an innovative solution that streamlines the process.
The Buy Before You Sell (BBYS) program allows you to leverage the equity in your existing home to make a stronger, non-contingent offer on a new property. If your home qualifies, you can get your equity unlock amount approved in 24 hours or less, with no cost or commitment required. Once approved, you can confidently purchase your next home and then sell your current one vacant, avoiding the hassle of moving twice.
Here’s how HomeLight Buy Before You Sell works:
Although there’s a flat fee of 2.4% of your current home’s sold price, the potential savings in other areas might outweigh the cost.
For example, you might save on moving expenses, temporary housing, and even the final purchase price of your new home. On top of that, HomeLight’s BBYS fees are typically much lower than the interest rates on bridge loans, which currently range from 9.5% to 12%.
