One of the advantages of hard money loans is that the private money lenders who underwrite them are not bound by the same rigid federal restrictions that govern banks and other institutional lenders. This series of blogs will explore the types of out-of-the-box loans in which private money lenders specialize and discuss how hard money loans can be a valuable tool for the savvy commercial real estate investor.

There are eight common types of loans that private money lenders will underwrite when banks cannot, which will be explored in detail over eight blogs: Cash-Out Bridge Loans, Loans to Foreign Nationals, Marijuana-Tenanted Properties, Note-Purchase Loans, Non-Recourse Loans, Vacant Land Loans, Tight Timeframe Lending, and Beyond the Typical Requirements.

What Is a Cash-Out Bridge Loan?

A cash-out loan is a type of hard money loan that allows a borrower to access equity that is tied up in property that the borrower already owns. While banks will occasionally allow borrowers to refinance a current loan to take cash out against the equity that has already been accrued through mortgage payments, it is more difficult for a borrower to increase an existing bank loan when the additional funds (the “cash out”) will not be used to improve the bank’s collateral property. This is where the private money lender’s flexibility can work to the borrower’s advantage.  Private money lenders, such as Montegra Capital,  underwrite loans giving the most importance to the value of the  property that secures the loan, without  having the kinds of restrictions on how, or where, the  funds from the real estate secured loan are being used.  Private lenders (frequently referred to as hard money lenders) typically are more willing to trust borrowers to decide where and how to spend their equity in their property. The cash-out bridge loan is an example of this.

Why Request a Cash-Out Bridge Loan?

A cash-out loan can be useful for real estate investors who already own properties that they would like to leverage to obtain funds to use for purchasing additional properties or to improve  other real estate they own to increase their value.

How Do Cash-Out Bridge Loans Work?

Typically, cash-out loans work in one of two ways:  by refinancing a property that has a conventional mortgage with a new  higher amount bridge loan so that the borrower obtains additional cash for their investment purposes, or using  a property that the borrower owns free and clear so that, again, the borrower is able to obtain new funds to use as they wish.  Either way, the borrower has access to cash that can be profitably invested.

Cash-out bridge loans are just one example of the flexibility and willingness of private capital lenders to work with their borrowers to find creative, outside-the- box lending solutions when conventional lenders  such as banks or life insurance companies have turned down their loan request. Check out the next blog in this series, Loans to Foreign Nationals, for another example of how hard money loans can work for you.

For more information about Montegra’s cash-out loan program, contact us at 303-377-4181 or loans@montegra.com.