Construction Loans – The Five Major Mistakes to Avoid

It’s a fact! Construction loans in Massachusetts are an effective, cost-efficient, and popular way to reduce the money crunch of building a new property, making major renovations, or developing new rental units.

Unlike mortgage loans, construction loans in Massachusetts are short-term financing agreements that provide borrowers with upfront cash to buy land, build on the land, or make significant additions to an existing property. One of the many upsides of construction loans in Massachusetts is that they do not penalize borrowers for early loan repayment. Construction loans only charge interest on the amount used during construction.

But, when it comes to construction loans in Massachusetts, experts agree and caution that getting a construction loan requires much thought, research, prep work, and homework to avoid making common mistakes when applying for or signing for a construction loan.

Making mistakes about construction loans can trigger all sorts of problems, including jeopardizing the all-important, construction loan approval.

Before applying for a construction loan in Massachusetts, it is a big mistake not to have finances in order. Sudden and last-minute changes to the financial status before loan closing translates into adding more debt to the key debt-to-income ratio. Last-minute changes to credit are a big mistake. An under-par credit score can trigger problems and should be improved before applying for a loan.

Also, a history of missed payments, late payments, and similar negatives can also be mistaken when it comes to getting a construction loan in Massachusetts.

A common mistake, when applying for construction loans in Massachusetts, is not understanding that interest rates on a construction loan vary, usually moving up and down with the prime rate. Expect to pay a higher interest rate on a construction loan than on a traditional mortgage. But the construction loan itself is short, usually for one year or the time required to build the new project.

Before signing on to a construction loan, careful research is important. Make sure the construction project is a workable, sound investment. A much too common mistake with construction loans in Massachusetts is being unprepared. Relying on word-of-mouth references and not doing adequate research about specific circumstances and situations can be a big mistake.

Smart borrowers do whatever it takes to have financial documentation well organized, long before applying for a construction loan. A borrower who approaches a lender with a detailed and complete (no loose ends) loan package, shows confidence and maximizes success in the construction loans in Massachusetts application process. Visit our website to know more details.

How Do I Find an Honest Commercial Hard Money Lender?

It takes a bit of research and homework but, understanding the process and finding an efficient, respectful, experienced, reliable, and honest hard money lender in Rhode Island is extremely important.

A hard money lender is usually a funding group that lends money to borrowers, based on common sense and the overall merits of the deal which needs funding. In many cases, a hard money lender in Rhode Island may be the best option for various types of borrowers in unique situations which may make it difficult to get a traditional loan or to get a loan without a dragged-out application and approval process.

Hard money lenders in Rhode Island work fast. While hard money loans take much less time to get than conventional loans, each hard money lender will provide a different time frame, depending on their process. Some offer an immediate review of the loan scenario and funding approval in a matter of days.

Hard money lenders in Rhode Island are the perfect option for borrowers with more complicated situations or multiple properties that traditional lenders won’t deal with, such as real estate investors, house flippers, bridge loans, or self-employed borrowers and business owners.

Especially for first-timers, the challenge is, sometimes, where to begin. Not only important things to know about hard money loans, how to properly apply, and, especially, how to find a reliable and honest hard money lender in Rhode Island.

Unlike traditional lenders, hard money lenders in Rhode Island do not have strict rules and requirements for borrowers. They usually don’t ask for stacks of documents and multiple layers of proof that the borrower will repay the loan.

Hard money lenders in Rhode Island have the flexibility to evaluate a borrower’s situation and review the plan and exit strategy outlined in the borrower’s executive summary. Often, a hard money loan approval can be done over a quick phone call.

Finding a reliable and honest hard money lender in Rhode Island takes some research and browsing, but it pays off. Search the web to understand what hard money lending is all about, how it works, and the relevant facts to consider.

The search for a reliable and honest hard money lender in Rhode Island is very important. Ask around. Get names. Google each lender and check their website to make sure they specialize in hard money loans, and that they originate and service loans, in-house. Search for reviews and referrals to help narrow down the list of possible lenders.

The hard money lender in Rhode Island that best fits the borrower’s situation and needs will be more concerned about building relationships with the borrower, rather than sifting through piles of forms and documents. Finding the right, reliable and honest hard money lender in Rhode Island is key for the trust and transparency that is essential, from both sides, for a successful hard money deal. Contact us to know more information.

What are Home Renovation Loans and Their Tax Benefits?

When it comes to renovation loans in Massachusetts, “rehabbers” can use a private loan as a lending tool for financing when they plan on holding the property until the rehab work has been completed or when the property goes to sale. Once a property has been renovated and sold for a profit, the loan is paid off in full or gradually, depending on the agreed terms.

While renovation loans in Massachusetts can also be a valuable tax benefit, like most things which are subject to government rules and regulations, writing-off renovation loans in Massachusetts can get a bit tricky.

Although the IRS guidelines are basic black and white, there’s also a fair amount of gray. Things have changed. In the past, home equity loan interest was generally tax deductible no matter how the borrowed money was used—whether it was a fix-up, paying off debt or other household reasons.

Since the Tax Cuts and Jobs Act of 2017 and the IRS Home Mortgage-Interest Deduction, homeowners can only deduct interest from home equity and renovation loans in Massachusetts —if the loans are being used to fund only certain types of projects.

While the wording can get complicated, it all comes down to whether the renovation loan in Massachusetts was used for a repair or a home improvement. For tax purposes, there is a big difference.

Several types of home improvement projects can be eligible for a tax write-off, but it ultimately comes down to what kind of remodel you’re completing and whether it’s classified—as a repair or an improvement.

A home repair is any work done to fix and restore a home to its original state. Like replacing broken window panes, fixing a leaking faucet, fixing a hole in the carpet, replacing broken hardware, or replacing a few broken roof shingles.

An IRS-approved renovation loan in Massachusetts is for any home improvement that increases the value of a home. Like adding a new driveway, a new roof, insulation in the attic, a new septic system, or built-in appliances. Other allowable improvements include adding a new garage door, fence, swimming pool, porch, deck, siding and window replacement, kitchen and bath remodel, new wood flooring, entry door replacement, manufactured stone veneer, basement finishing, and an addition of a master suite.

According to the IRS, qualifying as an improvement, the work must add value to the home, adapt it to new uses, or prolong its life. If repair-type work is part of the overall improvement, it may also be included.

Bridge Loans – Five Reasons You May Want to Consider Getting One

There is much to know and consider about bridge loans in Massachusetts. Although it’s often layered with legalese and business speak, a bridge loan is a short-term loan which acts as a “bridge” loan for a borrower who may be in the process of refinancing between one conventional loan to another or may need financing for a short period of time where obtaining a long-term conventional loan with a fixed rate just doesn’t make sense.

Most frequently, bridge loans in Massachusetts are loans against a current home, in order to make the down payment on a new home. Often, Bridge loans in Massachusetts may be a good option for purchasing a new home before a current home has sold. A borrower can use a portion of their bridge loan to pay off their current mortgage while using the rest as a down payment on a new home. Also, a homeowner can use a bridge loan as a second mortgage that covers the down payment for their new house.

The experts agree. There are many reasons why bridge loans in Massachusetts could be the ideal option. Providing a safety net for the possibility purchasing a new home, while a current home is on the market; the ability of putting a down payment on a new home without using the profits from selling an old one, and deferring payments or interest-only until the old home is sold.

While buying a home is the epitome of personal, the reasons for getting a bridge loan in Massachusetts are also individual and personal. According to facts and figures, in addition to loans against a current home, in order to make the down payment on a new home, 5 common reasons for bridge loans in Massachusetts are:

•  Buying a rental property, with the intention of renting it out, letting it appreciate over time, and/or selling it after prices increase. Typically, these types of borrowers use bridge loans in Massachusetts as short-term solutions until they can refinance with a traditional bank.

•  Buying at auction. Bridge loans in Massachusetts can provide funds to win the bid without having to come up with cash. Usually, enough equity in the primary home or owning it free and clear are requirements.

•  Relocating. Relocating to another city, bridge loans in Massachusetts can quickly provide the necessary capital to purchase a new property before the current property is sold.

•  Flippers. Investors, also known as “flippers,” often find the conventional lending world reluctant to finance their projects. Bridge loans in Massachusetts are hassle-free solution for properties that need repair, because most conventional lenders are not interested in making loans on properties in need of major repair.

•  Business Owners. Pulling cash out of existing properties with significant equity can free-up proceeds for business purposes.