How to Refinance With Hard Money Lenders
Hard money lenders are strict when it comes to lending. Unlike traditional banks -- which use credit and affordability as measures of lending -- hard money lenders use real estate and hard property as collateral in backing loans. Borrowers approaching private banks -- or hard money lenders -- often do so when they have exhausted borrowing options at other institutions. Borrowers using hard money lenders tend to have a poor credit history. Refinancing with a hard money lender can be done if you do your homework and work closely with the broker.
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Instructions
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Assess your equity. If you borrowed money to finance the purchase of a home, for example, determine with your broker the current market value against what you still owe. Private lenders may be skeptical to lend to borrowers who owe more than what their home is currently worth. There are various websites you can use to calculate the current value of your home.
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Show your financial worth. Display proof of employment to the broker. Present the broker with paycheck stubs for at least the 30 previous days. The better your job the more likely you are to obtain a refinancing agreement. Additionally, provide the broker with any new evidence of real estate you can use as collateral. If a piece of property was gifted to you in a will, for example, use this evidence that you can afford any updated financing agreement.
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Reduce your interest payment by two percent. Work with the broker to come up with a plan that drops your interest rate two percentage points by securing you into a non-adjustable mortgage and paying on it for a longer period of time. Securing a two-percent drop, according to Consumer Reports, puts most borrowers ahead in a refinancing situation. Consult the American Association of Private Lenders Code of Ethics for lender negotiation guidelines.
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