After the Hard Money

[Wes Blaney]

I understand the process in finding hard money lenders and leveraging this strategy when the right time comes up, however, what I do not clearly understand is how to transfer away from hard money into a (let's say) traditional loan, and the next logical steps in the process.

Let's say you negotiate your deal, $'s, points, and terms, with a hard money lender.  This property is then actually purchased in your name with their money, and the work is completed on the property sooner than initially budgeted (you pat yourself on the back, but still march on).  Then when you are ready to transfer out of the hard money and into a traditional loan, do you contact your banker to set up a new loan?  

Obviously, you'll want the 'cash' to pay off the hard money, but I guess I am confused how this is transferred.  Because the house was first purchased in your name, are you now doing a simple loan transfer (Hard $ -to- Bank) and taking out a new loan for the market price of the property?  Thanks for the insight & clarifying this.

[Andrew Postell]

@Wes Blaney this is a common question. What you will be doing is a formal refinance of the hard money loan (HML). The "conventional" lender (if that's the loan type you use) will payoff the HML and your new loan will be with the new lender. So if you owe the HML $50,000 then your new loan with the "conventional" lender will be $50,000...I'm over simplifying here but I just want you to understand the concept.

It is important to be PreQualified with a lender BEFORE you enter the HML. If there is a sticking point to being qualified you want to know about it beforehand so you aren't stuck in a 14% loan. Feel free to ask additional questions if you need. Thanks!