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in Ontario, CA
Ontario real estate investors have two popular financing options: DSCR loans and hard money loans. Both are non-QM products that don't rely on W-2 income for qualification.
DSCR loans focus on rental income from investment properties. Hard money loans prioritize the property's value and equity. Each serves different investment strategies and timelines.
Understanding these differences helps you choose the right financing for your Ontario investment. Your choice depends on your timeline, property condition, and long-term goals.
DSCR loans qualify investors based on a rental property's income rather than personal income. Lenders calculate the debt service coverage ratio by comparing monthly rent to the mortgage payment.
These loans typically offer longer terms, often 30 years with fixed or adjustable rates. They work best for stabilized rental properties that generate consistent income. Rates vary by borrower profile and market conditions.
DSCR financing suits investors building long-term rental portfolios in Ontario. The approval process focuses on the property's ability to cover its own debt.
Hard money loans are asset-based short-term loans primarily used by real estate investors for property acquisition and renovation projects. These loans focus on the property's current or future value.
Terms typically range from 6 to 24 months with higher interest rates. Approval happens quickly, often in days rather than weeks. Rates vary by borrower profile and market conditions.
Investors use hard money for fix-and-flip projects or bridge financing in Ontario. The property itself serves as the primary collateral, making credit less critical.
Timeline separates these loans significantly. DSCR loans offer 30-year amortization for long-term holds. Hard money provides 6-24 month terms for quick projects.
Qualification criteria differ substantially. DSCR lenders analyze rental income and debt coverage ratios. Hard money lenders prioritize property value and exit strategy over income.
Cost structures vary between the two options. DSCR loans generally have lower rates for longer terms. Hard money comes with higher rates but faster access to capital.
Property condition matters more for DSCR loans. They require rent-ready properties generating income. Hard money works for distressed properties needing renovation.
Choose DSCR loans when buying stabilized rental properties in Ontario for long-term holds. They offer better rates and terms for properties already generating rental income.
Hard money makes sense for fix-and-flip projects or properties needing major work. Speed matters when competing for Ontario deals or funding time-sensitive renovations.
Some investors use both strategically. Start with hard money to acquire and renovate. Then refinance into a DSCR loan once the property generates rental income.
Your investment timeline and property condition guide your choice. Consider working with a San Bernardino County mortgage broker to explore both options.
DSCR loans typically require 620-680+ credit scores. Hard money lenders are more flexible, sometimes accepting scores below 600 since they focus primarily on property value and equity.
Hard money loans close much faster, often in 5-10 days. DSCR loans take 3-5 weeks similar to traditional mortgages due to more extensive underwriting and documentation.
No, both DSCR and hard money loans are for investment properties only. They're designed for investors, not primary residences or second homes in Ontario.
DSCR loans typically require 20-25% down on investment properties. Hard money lenders usually want 25-35% down or equivalent equity, focusing on loan-to-value ratios.
DSCR loans often suit first-time investors buying turnkey rentals. Hard money works better if you have renovation experience and a solid exit strategy for quick projects.