Hard Money Lenders Delaware: Quick Funding for Investments

Published on August 28th, 2024
10 min read

Joseph Gordon Editor
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Joseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.

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Delaware’s real estate market can be a hotbed for investment opportunities. Whether you’re eyeing a fixer-upper in Wilmington or a commercial space in Dover, securing the right financing is important. This is where hard money loans come into play—offering a faster, more flexible solution than traditional lending options.

Hard money loans are popular among Delaware investors who need quick access to capital. These loans are typically backed by the value of the property itself rather than the borrower’s credit score, making them an attractive option for those looking to take advantage of the state’s dynamic real estate opportunities.

Editor’s note: This post is for educational purposes and is not intended to be construed as financial advice. HomeLight always encourages you to consult your own advisor.

What is a hard money lender?

A hard money lender provides short-term loans secured by real estate, catering primarily to investors such as house flippers and those purchasing rental properties. Unlike traditional lenders, hard money lenders focus on the property’s after-repair value (ARV)—the estimated value of the property after renovations. ARV is crucial in determining the loan amount, with the lender often offering a percentage of this value.

Interest rates for hard money loans are higher than those for conventional loans, reflecting the increased risk. If a borrower fails to repay the loan, the lender can foreclose on the property, which serves as collateral. This risk makes hard money loans a tool for experienced investors who understand the potential rewards and pitfalls.

How does a hard money loan work?

In Delaware, hard money loans offer a unique and flexible way to finance real estate investments. Here’s how these loans typically work:

Short-term loan: Hard money loans are designed as short-term financing solutions, typically ranging from 6 months to a few years, depending on the lender and the project.
Faster funding option: Unlike traditional mortgages, which can take 30 to 50 days to close, hard money loans can often be funded within days, making them ideal for time-sensitive deals.
Less focus on creditworthiness: Hard money lenders are less concerned with your credit score and more focused on the property’s value, which makes it easier for some borrowers to qualify.
More focus on property value: The loan amount is typically based on a percentage of the property’s after-repair value (ARV), ensuring the lender has sufficient collateral.
Not traditional lenders: Hard money lenders are private individuals or companies, not banks or financial institutions, offering more flexibility in terms and conditions.
Loan denial option: If the property doesn’t meet the lender’s criteria or the project seems too risky, the loan may be denied, regardless of your financial standing.
Higher interest rates: Interest rates for hard money loans are higher than conventional loans, typically ranging from 8% to 15%, due to the increased risk taken by the lender.
Might require larger down payments: Borrowers may need to put down 20%–30% of the loan amount upfront, depending on the lender’s requirements and the project’s risk profile.
More flexibility: These loans often come with more flexible terms, allowing you to structure payments, repayment schedules, and even the overall loan amount to fit your project needs.
Potential for interest-only payments: Some lenders offer interest-only payment options during the loan term, with the principal due at the end of the loan period.

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What are hard money loans used for?

Hard money loans in Delaware are often utilized for a variety of real estate investment purposes. Here’s how they might be used:

Flipping a house: For flipping homes, where speed is crucial, hard money loans offer quick access to funds, allowing investors to purchase, renovate, and resell a property quickly.
Buying an investment rental property: Investors looking to buy rental properties can use hard money loans to quickly secure a property, particularly in competitive markets where traditional financing might take too long.
Purchasing commercial real estate: Hard money loans can be a solution for acquiring commercial properties that need significant renovations or are not currently generating income, which might disqualify them from traditional financing.
Borrowers who can’t qualify for traditional loans: Hard money loans can help those who don’t meet traditional lenders’ stringent requirements due to issues like a low credit score or high debt-to-income ratio.
Homeowners facing foreclosure: For homeowners at risk of foreclosure, hard money loans can provide the necessary funds to pay off existing debts and avoid losing their property.

How much do hard money loans cost?

Hard money loans generally cost more than traditional loans due to the higher risk for lenders and the convenience of quick, flexible funding. Typical costs include:

Interest rates: 8% to 15% or higher, based on risk assessment.
Origination fees: 1% to 5% of the loan amount.
Closing costs: Legal, appraisal, and administrative fees.
Points: A percentage of the loan amount charged upfront.

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 assist in purchasing homes with lower down payments and reduced interest rates.
Peer-to-peer loan: These loans are provided by individual investors through lending platforms like Funding Circle, functioning similarly to hard money loans but often with different terms.
Specialized loan programs: Consider specialized loans for fixer-uppers or investment property refinancing if you already have a hard money loan and seek to replace it.
Request a seller financing option: In some cases, sellers may agree to finance the purchase themselves, which can result in lower closing costs and less stringent eligibility requirements.

How to buy before you sell

HomeLight’s Buy Before You Sell program offers a unique solution for homeowners who want to buy a new home before selling their current one. This program provides a bridge loan that covers the cost of your new home, allowing you to move in without the stress of selling first.

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 you could see 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%.

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A home that is building equity for its owners.

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3 top hard money lenders in Delaware

Traditional lenders might not be the solution for every real estate investment. If you’re looking to move quickly and capitalize on an opportunity, explore the hard money lending options available in Delaware.

Aloha Capital, Delaware

Aloha Capital, based in Colorado, is a private real estate lender and asset manager. It offers bridge, hard money, and amortizing term loans, as well as value-add or fix-and-flip financing for single-family, multi-family, and ground-up construction projects. It also provides permanent 30-year loans on single-family rental properties.

Lending clientele: Residential real estate investors

Loan criteria: Up to 80% LTV on Purchase, Refinanc, or Cash Out Refinance; Loans betwen $75,000 to $3 million

Aloha Capital has a 4.6-star rating on Google from 18 reviews.

alohaprivatelending.com/hard-money-loans-delaware

303-245-0291

New Silver, Delaware

New Silver, based in Brookline, funds real estate investment loans across 39 states, including Delaware. Founded in 2018, they offer fix-and-flip, rental property, and ground-up loans for non-owner-occupied properties in urban or suburban areas with 1–50 units. Closing typically takes five to 10 days, or longer depending on the property’s location.

Lending clientele: Residential real estate investors

Loan criteria: Varies by loan program

New Silver has a 3.9-star rating on Google from over 30 reviews.

newsilver.com/hard-money-lending/delaware

855-844-5626

Lima One Capital, Delaware

Based in South Carolina, Lima One Capital offers hard money loans to real estate investors nationwide, including Delaware. They have funded over $9 billion across 28,000 projects, with loan programs for fix-and-flip/bridge, new construction, rental, short-term rental, and multi-family properties.

Lending clientele: Residential, commercial, and development investors

Loan criteria: LTV varies by loan program: up to 75% for fix-and-flip, 80% for bridge, 70% for new construction, 80% for rental, and 70%-75% for short-term rental.

Lima One Capital has a 4-star rating on Google from nearly 200 reviews.

limaone.com/delaware-hard-money-lender

800-390-4212

Should I partner with a hard money lender in Delaware?

Working with a hard money lender in Delaware can be a strategic move, especially for real estate investors who need fast project funding. These loans are particularly well-suited for those looking to flip properties, invest in rental units, or purchase commercial real estate that may not meet traditional lending criteria.

With their focus on property value rather than credit scores, hard money loans can provide the flexibility needed to seize opportunities quickly.

However, for homeowners looking to leverage their equity without taking on the higher interest rates and shorter repayment periods associated with hard money loans, HomeLight’s Buy Before You Sell program offers a compelling alternative.

This program allows you to secure your next home before selling your current one, providing a smoother transition without the rush or financial strain. Consider your specific needs and goals to determine the best option for your situation.

As with any major financial decision, consider your long-term strategy and consult with a financial advisor to make sure it aligns with your overall investment goals. If you’re looking to connect with investor-friendly real estate agents in Delaware who have access to trusted hard money lenders, let HomeLight introduce you to top professionals in your area who fit that criteria.

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