When you start a new project it can feel like your to-do list is a million items long. Adding a bad lender to that list is the last thing you want to deal with. When you’re unhappy with your lender it might feel like your options are limited and the easiest thing to do is to tough it out until you pay the loan off.

Things can get even worse when your lender refuses to grant you additional funds necessary to complete the project or an extension when the property is on market for longer than expected. If your current lender isn’t willing to work with you, the best way to save your project might be to refinance into a new loan with another lender.

Here are the top 4 reasons why you might need to refinance:

Reason 1: Wanting a better rate than what you currently have

In a highly competitive market, investors must act quickly to secure the property they want. It’s not uncommon for investors focus on securing the property first, only to continue shopping for lower rates with other lenders when they begin the rehab process. Once they find a lender with a lower rate, they can simply refinance out of their current loan.

Reason 2: Not receiving construction draws on time

A lender that delays construction draw disbursements inevitably slows down your project’s timeline. It’s typical for a lender to hire a third-party inspector that can’t keep up with the number of draw requests or takes too long turning in their report. Other times lenders don’t have the funds on hand to wire money to you.

The industry norm is receiving your construction funds 4-5 days of receiving the initial request. This gives the inspector enough time to visit the property and your loan officer enough time to review the request. Refinancing with a lender that is faster and more efficient in handling their construction draws means less waiting time and more time spent bringing your project toward completion.

Reason 3: Needing a loan extension

If you’re approaching your loan maturity date and you’re behind on your project timeline the best thing you can do is request a loan extension. Unfortunately, not all lenders are understanding when investors run into roadblocks like unforeseen slowdowns in construction or spending more time on the market than expected. These lenders will call their loan regardless of the circumstance and leave investors in a tough spot. In this situation, investors have 2 options: sell the project either partially complete or for a low-ball offer and hope to break even or they can refinance with another lender.

Reason 4: Needing additional funds

There are plenty of reasons why you might need more money to complete your project, but not all lenders are willing to increase funding mid-rehab. Unexpected issues like flooding, mold, or theft of materials are all roadblocks that would require you to need additional construction funds. If you don’t have cash reserves and your lender is refusing to give you more funds, a refinance might be your next best option. A refinance can rescue you from your current lender and bring your project to successful completion for maximum profits.

In Conclusion

In a picture-perfect world, you would want your lender to support you throughout your entire project. The unfortunate truth is there are plenty of reasons a lender can push you towards refinancing mid-rehab. Refinancing can sound confusing and even risky, but it’s more common than you may think. It has the potential to dramatically improve your situation and give you the tools you need to keep your project going.

As the DMV’s largest hard money lender, we’ve helped investors like you get the funding or time they need to complete their projects. The refinancing process is straight-forward and can typically happen as quick as 2 business days. Click the button below to see the most asked questions about our refinancing loan program or to talk to a dedicated loan specialist today!