Hard Money Lenders Indiana: What You Need To Know

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Are you considering a real estate investment in Indiana and wondering about hard money loans? Whether you’re eyeing a fixer-upper in Gary or planning to expand your rental portfolio in Indianapolis, hard money lenders in Indiana offer a unique financing option. Hard money loans are known for their flexibility and speed, making them ideal for investors with tight project timelines or those who may not qualify for traditional financing.

For those new to the concept, this guide will walk you through the essentials of hard money lending in Indiana. We’ll cover how these loans work, what they’re used for, and how much they cost. We’ll also explore alternative financing options for homeowners needing to buy a new home before selling their current one. By the end, you’ll be able to make an informed decision about whether working with a hard money lender in Indiana is right for you.

Start Making Offers Without Waiting to Sell Your Home

Through our Buy Before You Sell program, HomeLight can help you unlock a portion of your equity upfront to put toward your next home. You can then make a strong offer on your next home with no home sale contingency.

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 is a private entity or company that provides short-term loans secured by real estate. Unlike conventional lenders, hard money lenders in Indiana focus more on the value of the property being used as collateral than on the borrower’s credit score. Their clients normally include house flippers and those purchasing rental properties, who require quick and flexible financing solutions.

Hard money lenders use the after-repair value (ARV) to determine loan amounts. ARV is the estimated value of a property after all repairs and renovations are complete. Typically, they lend a percentage of the ARV, ensuring that the investment remains profitable and secure.

These loans often come with higher interest rates, ranging from 8% to 15%, and shorter repayment periods, usually between 6 and 24 months. Borrowers should also expect additional costs like origination fees, closing costs, and points. If a borrower fails to repay the loan, the lender can seize the property to recover their investment.

How does a hard money loan work?

Let’s take a look at how hard money loans work and what advantages they offer to see if they might be a good fit for you.

  • Short-term loan: These loans typically have a repayment period of 6 to 24 months, unlike the 15- to 30-year terms of conventional mortgages. Some lenders may offer extensions of up to 36 months if necessary.
  • Faster funding option: When time is of the essence, hard money loans can be approved within days, unlike the typical 30 to 50 days for a conventional mortgage.
  • Less focus on creditworthiness: Approval is less dependent on your credit score and income history and more on the property’s value.
  • More focus on property value: These loans use the loan-to-value ratio of the property as collateral, emphasizing the asset’s worth.
  • Not traditional lenders: Hard money loans come from individual investors or private lending companies, not traditional banks.
  • Loan denial option: Often used by those with poor credit who have been denied a mortgage but have significant home equity.
  • Higher interest rates: Due to the higher risk, these loans come with higher interest rates than traditional mortgages.
  • Might require larger down payments: Depending on the property’s value and loan specifics, borrowers may need to provide a larger down payment, sometimes up to 20% to 30%.
  • More flexibility: With less regulation, hard money lenders in Indiana can set flexible terms, helping borrowers avoid foreclosure.
  • Potential for interest-only payments: Unlike traditional mortgages, hard money loans may initially allow for interest-only or deferred payments, providing flexibility during the loan term.

What are hard money loans used for?

Hard money loans cater to specific financing needs in the Indiana real estate market. They are often sought by investors and homeowners who require quick funding or face challenges in securing traditional bank loans. Here are some common scenarios where hard money loans could be beneficial:

Flipping a house: For Indiana investors focused on flipping homes, hard money loans provide quick access to funds for purchasing and renovating properties. These loans allow flippers to acquire properties quickly, complete necessary renovations, and resell them for a profit in a short timeframe.

Buying an investment rental property: Investors looking to acquire rental properties can use hard money loans to quickly purchase properties, especially those needing immediate repairs. Unlike traditional bank loans, hard money loans allow landlords to begin renovations ASAP and start generating rental income faster.

Purchasing commercial real estate: Commercial real estate investors may find hard money loans attractive due to their flexibility and fast closing times. These features can be especially beneficial when timing is crucial, allowing investors to move quickly on desirable properties without waiting through lengthy traditional loan approvals.

Borrowers who can’t qualify for traditional loans: Individuals with significant home equity but poor credit or other disqualifying factors often turn to hard money lenders. These loans focus more on the value of the asset than the borrower’s credit score, providing an alternative financing option.

Homeowners facing foreclosure: Homeowners nearing foreclosure might use hard money loans to refinance their debts or buy time to sell their property. This can offer a temporary solution to avoid losing their home and prevent a foreclosure mark on their credit report.

How much do hard money loans cost?

The cost of hard money loans is generally higher than traditional loans due to the increased risk and convenience they offer. Typical costs include:

  • Interest rates: These can range from 8% to 15%, depending on the lender’s risk assessment.
  • Origination fees: Lenders may charge 1% to 5% of the total loan amount as an origination fee.
  • Closing costs: These include various fees such as legal, appraisal, and administrative fees.
  • Points: Lenders might charge points (a percentage of the loan amount) upfront, adding to the initial loan cost.

You can use online calculators to estimate these costs accurately.

Alternatives to working with hard money lenders

If you’re a homeowner looking to leverage your home’s equity, here are some alternatives to consider:

Take out a second mortgage: If you have significant equity, a home equity loan or HELOC can provide funds at lower interest rates than hard money loans.

Cash-out refinance: This option allows you to refinance your existing mortgage, pulling out cash to finance new investments, often with lower interest rates.

Borrow from family or friends: Personal loans from family or friends can offer flexible repayment terms and potentially lower or no interest rates, making them a more affordable option.

Use a government-backed loan program: Programs from the FHA, VA, or USDA can help buyers purchase homes with lower down payments and reduced interest rates.

Peer-to-peer loan: Loans from individual investors through platforms like MeridianLink or Funding Circle can function similarly to hard money loans but often come with 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: Some sellers may agree to finance the purchase themselves, resulting in lower closing costs and less stringent eligibility requirements.

How to buy before you sell

Sometimes, the perfect home appears when you least expect it. Whether it’s a charming Victorian in Irvington or a modern loft in downtown Indianapolis, timing is everything. For Indiana homeowners looking to buy a new home before selling their current one, HomeLight offers an innovative solution that simplifies the process.

The Buy Before You Sell (BBYS) program allows you to use the equity in your existing home to make a strong, 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 new home and then sell your current one vacant, avoiding the hassle of moving twice.

Here’s how HomeLight Buy Before You Sell works:

The program carries a flat fee of 2.4% of your current home’s sold price. Despite this, the potential savings in other areas can outweigh the cost, such as reduced moving expenses, avoiding temporary housing, and potentially securing a better purchase price on your new home. Additionally, HomeLight’s BBYS fees are typically much lower than the interest rates on bridge loans, which currently range from 9.5% to 12%.

3 top hard money lenders in Indiana

Traditional lenders may not suit every real estate investment scenario. If you need to move quickly and take advantage of an opportunity, consider working with one of these top-rated hard money lenders in Indiana.

Rental Home Financing

Based in Indianapolis, Rental Home Financing provides investment loans for residential rental properties. They offer a range of loan products, including those for short-term rentals, apartment buildings, and new construction. With over 25 years of experience in commercial and multifamily mortgage lending across various market conditions, they specialize in DSCR (debt service coverage ratio) loans and are authorized to lend in most regions of the United States.

Lending clientele: Residential real estate investors

Loan criteria: Depends on the loan program; in most cases, up to 75% LTV

CPL Investments

Based in Carmel, CPL Investments is a hard money lender serving Indianapolis and the surrounding communities. In its 10-year history, the company has completed more than 500 real estate deals. They offer three main lending services to real estate investors: fix ‘n’ flip loans, short-term loans, and new construction loans. They can close loans in as little as a few days, and their approvals are valid for 365 days.

Lending clientele: Residential and commercial real estate investors and developers

Loan criteria: Up to 60%–65% of ARV

The Hard Money Co.

Based in Milwaukee, The Hard Money Co. currently lends in 13 states, including Indiana. Last year, they closed 500-plus loans, providing over $81 million in total funding. They only lend to real estate investors and do not provide personal loans or loans for a primary residence. Loans can be funded in just seven to 10 days, and they offer six-month terms with a 15% interest rate. The Hard Money Co. works with investors of all experience levels, primarily flippers and those looking to renovate rental properties.

Lending clientele: Residential real estate investors

Loan criteria: Up to 65% ARV

Investing in real estate?

Hire an investor-friendly real estate agent who can help you get access to off-market properties at a discount and assess potential rental income based on market trends. HomeLight can connect you with investment property specialists at no cost.

Should I partner with a hard money lender in Indiana?

A hard money lender in Indiana might be a suitable option depending on your unique situation and the reasons behind your real estate investment. Hard money loans are best for projects that require quick action or when traditional financing just isn’t feasible. If you’re prepared to handle the higher costs and shorter repayment terms for the sake of fast, flexible funding, a hard money lender in Indiana might be the right choice.

For homeowners wanting to tap into their home’s equity, HomeLight’s Buy Before You Sell program offers an excellent alternative. Instead of dealing with high-interest rates, you’ll pay a small flat fee while enjoying a more competitive offer and a smoother move. This program allows you to make a stronger offer on a new home by leveraging your current home’s equity, streamlining the entire process.

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

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