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What is Soft Money Lending?

Soft money lending is a new type of long-term loan program that is fastly becoming the leading solution used by real estate investors for their investment properties. 


A soft money loan incorporates many of the benefits of hard money lending, however, instead of a program structured around the property, it is based on the borrower’s credit score, investing history, and liquid assets. This is a program that reflects the needs of investors who require a lot of cash and significant financing in the long term. 


While it requires more documentation than hard money lending, it is easier to apply for a soft money loan and get approval for than a bank mortgage or traditional lending institutions. These types of loan programs are a quick, affordable, and secure form of private money lending that benefits both the borrower and the lender. 


Soft money lending is applicable for a majority of investment property types, such as single-family, multi-family, commercial, mixed-use, office, retail, etc, as it can fund various projects ranging from reconstruction, rehab, tenancy, and equity growth. 


This loan program is a growing form of private money lending that is opening the doors and reaching new heights as it lowers the barrier to entry in real estate investment by making it more accessible and reasonable for everyone involved.

How do Private Lenders Use Soft Money Loans?


For private lenders, soft money loans are a relatively newer loan program. It has a lot of potential within the market, but it mainly serves as an alternative to hard money loans and conventional loans. 


Private lenders utilize soft money loans with real estate investors who need a little bit more help and guidance - due to their employment history or current income.  Many self-employed borrowers choose soft money loans as they require no income verification and are more flexible. 


While the approval process for soft money lending is still very fast and basic in relation to a standard bank mortgage, soft money loans require more documentation than hard money loans, such as a look at one’s credit score and history. The reason for looking at one’s credit score is to evaluate whether one would be reliable in paying off their debt and whether their reliability matches with their investment strategy. Typically, a good credit score for approval is 650 or higher. Either way, lenders require more information than with hard money lending as reliability and security is essential to their operations. Additionally, this allows them to provide borrowers with their funds on a much more suitable timescale and accurate financial plan. Overall, lenders work with soft money loans as they can help sustain and grow a potentially rewarding real estate investment project for the borrower.


Who Should Use a Soft Money Loan?


Anyone can use a soft money loan when considering real estate investing. However, this type of loan program has become popular with first time investors due to the structure of the loan program. Oftentimes, first-time investors do not have a fully formed idea of what they want to do with their money yet or they do not know where to start in terms of growing their equity through real estate. 


A first time buyer or prospective borrower can get a soft money loan with an interest rates as low as 4.375% and 85% LTV. As long as you have a reasonable loan scenario, you can apply for a soft money mortgage loan program to purchase your investment property with a private lender.


A soft money loan can serve as a great starting point for getting into real estate investment as it allows for a long period of time to get one’s bearings of the market. 


Depending on your lender, you can get a loan that exceeds 70% of your LTV ratio as with lower interest rates and a longer loan period, the lender can maintain its debt through a reliable and secure program. Overall, borrowers value soft money loans because they can borrow a lot of money initially and pay little in cost and interest, periodically.


What are the Benefits of Soft Money Loans?


There are many benefits to soft money lending that make it so enticing for real estate investors. Some of the biggest benefits include low interest rates, lower costs, and longer terms. With these types of benefits, investing in properties can feel quite accessible. Through proper financing, borrowers can reach great lengths in their investment strategy. 

Kings Of Capital is a private money lender offering short-term mortgage loans to real estate investors nationally for multifamily purchases and rehab . Locating a great lenders near you that understand your market is very important. Get a private money loan for an investment property purchase, refinance, equity cash out, rehab or new construction.


Get ahead of the competition in real estate market. It’s Fast, Easy, and Just Takes Minutes.  Speak to a Multi-Family Bridge Loan expert today by calling 267-630-2875


Get a Free. No Obligation. Instant Rate Quote Today!

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