How Much Do Hard Money Lenders Charge and What to Expect

Hard money lenders are known to charge high interest rates, often ranging from 12% to 18% per annum. This is because they provide short-term, high-risk loans to borrowers who may not qualify for traditional financing.

The origination fee, which can range from 2% to 5% of the loan amount, is another significant cost associated with hard money lending. This fee is essentially a commission paid to the lender for arranging the loan.

Borrowers can expect to pay a points system, where one point equals 1% of the loan amount. For example, a $100,000 loan with a 3-point fee would result in an additional $3,000 added to the loan balance.

Hard money lenders are private lenders, also known as private money lenders, who look for a high return on investment without having to rehab or purchase a property themselves.

They're primarily interested in the fundamentals of the deal, such as the property's value or after-repair value (ARV).

Hard money lenders are willing to take on more risk because they're not concerned with the borrower's credit score.

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Hard money lenders take a huge amount of risk by providing financing irrespective of the credit score. This risk is a major factor in their requirements.

To mitigate this risk, hard money lenders often require a significant down payment from borrowers. The lender will also have the right to sell the property if the borrower defaults on the loan.

In order to secure their investment, hard money lenders typically require a strong exit strategy, such as a clear plan for selling the property or refinancing the loan.

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The lender's first priority is to assess the risk profile of the borrower. This involves evaluating the borrower's financial stability and credit history. The lender will also consider the borrower's experience with real estate investments. The riskier the borrower, the higher the interest rate will be.

The lender views the property chosen by the borrower as collateral to secure the loan. This means that if the borrower defaults on the loan, the lender has the right to sell the property to recover their investment. Hard money lenders take a huge amount of risk by providing financing regardless of the borrower's credit score. To mitigate this risk, they charge higher interest rates.

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When a hard money lender assesses a property, the condition and location play a significant role in determining the interest rate. The lender puts extra effort into understanding these factors because they can greatly impact the interest rate.

Properties located in desirable areas can qualify for a lower interest rate because they seem less risky. The lender considers the property's location when evaluating the loan.

The lender also considers the property's condition, with those in good condition seeming less risky and qualifying for a lower interest rate.

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Easy Street Capital is a private lender that offers a high leverage fix & flip / bridge loan product with a 9.9% - 11.9% interest rate.

It's worth noting that Easy Street Capital has a relatively high minimum credit score requirement of 600.

This lender offers loan amounts of $75,000 to $2 million with loan-to-collateral ratios (LTCs) of up to 90% and loan-to-value ratios (LTVs) of up to 70%.

You can expect a quick closing time of 48 hours for qualified loans with Easy Street Capital.

The lender operates in most states, but there are exceptions in LA, MN, MO, NV, NY, SD, ND, Baltimore, Chicago, Detroit, and Inner City NJ.

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Hard money lenders charge higher interest rates compared to traditional bank loans, often starting at 7% but typically ranging from 10% to 15%. Hard money loans are designed for short terms, usually 12 to 18 months.

The interest rate on a hard money loan can be influenced by various factors, including the property's condition, credit score of the borrower, location, loan-to-value ratio, and more. A lower loan-to-value ratio can result in a lower interest rate, as the property provides better security for the loan.

Here are some average interest rates and fees associated with hard money loans:

A bridge loan, also known as transactional funding, is a type of very short-term loan that enables a wholesaler or investor to purchase a property without using any of their own funds.

It's a hard money loan that typically lasts only 24 hours to five days, which is why it's called a "bridge" loan - it temporarily bridges the gap between the purchase and the final funding arrangement.

This type of loan is usually used to secure a property quickly, often in a real estate transaction where time is of the essence.

HouseMax Funding is a nationwide hard money lender based in Austin, TX, that makes fix and flip and rental loans in all 50 states. It aims to close loans in 10 days or less.

To prequalify with HouseMax Funding, you'll need to provide a loan application, one form of government-issued photo ID, financial and bank statements from the last 60 days, a purchase contract, and details of your renovation plan.

HouseMax Funding is a direct lender, meaning it makes loan decisions and funding directly, without the need for intermediaries.

HouseMax Funding doesn't provide rate or funding details on its website, so you'll need to contact the company with your loan details to get a quote.

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Hard money lenders charge higher interest rates compared to traditional bank loans, often starting at 7% and typically ranging from 10% to 15%. This is because they're taking a significant risk by providing financing without considering credit scores.

The interest rate on a hard money loan can vary depending on several factors, including the property's condition, credit of the borrower, location, LTV, and more. Hard money lenders carefully analyze these factors to understand the risk of the loan.

Hard money loans are usually short-term, ranging from several months to a few years, which means monthly payments will likely be higher. This is a key consideration for borrowers.

The loan-to-value (LTV) ratio is a significant factor in determining interest rates. A lower LTV ratio can result in a lower interest rate, as the property provides better security for the loan.

Here's a breakdown of the typical costs associated with hard money loans:

Keep in mind that these costs can vary depending on the lender and the specific loan terms.

Monthly Carrying Cost is a crucial aspect of Hard Money Loans. It refers to the interest due on the loan each month.

Hard Money Interest rates can vary, but they're generally in the range of 8% to 18% per year. This means you'll be paying a significant portion of your monthly payment towards interest.

With Hard Money Loans, loan durations are typically shorter, and payments are often interest-only. This means you'll be paying the monthly interest due without reducing your loan balance.

Your loan balance will remain the same until you start making principal payments. This can be a challenge, as it means you'll be paying interest on the original loan amount for a longer period.

Hard money lenders are known for their quick approval and funding process, but the speed can vary between lenders. If you need funds urgently, it might make sense to prioritize lenders that can provide a fast turnaround.

On average, a conventional loan takes 30 days to close, while many hard money lenders can close in one to two weeks. At some lenders, you can even get cash in hand in 10 days or less.

Here's a comparison of typical closing times:

If your hard money lender requires a down payment, you can get it from a few different places, including your own savings.

Traditional mortgage lenders usually require a down payment, but some hard money lenders do too, so it's essential to check with your lender first.

Hard money lenders that do require a down payment usually want 20% of the purchase price available.

You can also try to save up for a down payment by setting aside a portion of your income each month.

The amount of the down payment varies contingent on multiple factors, so it's a good idea to check with your lender to see what they require.

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Hard money lenders are known for their quick approval and funding process, but the speed can vary between lenders. If you need funds urgently, it might make sense to prioritize lenders that can provide a fast turnaround.

HouseMax Funding, for example, aims to close loans in 10 days or less, making it a great option for those who need access to capital quickly. A conventional loan, on the other hand, can take 30 days to close.

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Many hard money lenders can close in one to two weeks, giving you a significant advantage over other potential investors. This faster closing time means you can get cash in hand quickly and make the most of your investment opportunity.

Here's a comparison of the typical closing times for conventional loans and hard money loans:

Hard money lenders charge a range of fees and costs that can significantly impact the overall cost of borrowing. These costs include upfront fees, closing costs, and other charges associated with the loan.

Origination fees, also known as upfront loan fees or points, can range from 1% to 5% of the amount borrowed. This cost represents what it costs the lender to make the loan.

Document preparation and underwriting fees can range from $500 to $5000, depending on the complexity of the loan. These fees cover the cost of preparing the loan and legal documents that secure the lender's interest in the property.

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Here's a breakdown of some common hard money lender fees and costs:

Keep in mind that these fees and costs are in addition to the interest rates on the loan, which can range from 8% to 18% per year.

Hard money lenders may require a down payment from borrowers, but it's not a fixed fee. The amount varies based on several factors.

Some lenders may offer financing with little to no down payment, especially if the deal's fundamentals are strong. You might be able to get 100% financing with a hard money loan.

However, it's not uncommon for lenders to require a down payment of 10% based on the property's value after repairs. This is a short-term loan, so you might not have to make monthly payments if you sell the property quickly.

Lenders may offer up to 90% to 100% of the purchase price and 100% of the rehab budget, but only if the total loan amount is less than 70% to 75% of the after-repair loan-to-value (ARLTV).

Hard money lenders offer various types of loans to real estate investors, including fix and flip loans, bridge loans, and construction loans. These loans can be used for short-term financing, allowing investors to quickly access funds to purchase and renovate properties.

Some hard money lenders, like Kiavi, offer fix and flip loans that can go up to 95% LTC / 80% ARV. This means investors can borrow a significant portion of the property's purchase and repair costs.

Easy Street Capital is another lender that offers high leverage fix and flip / bridge loan products, with loan amounts of $75,000 to $2 million and LTCs of up to 90%. They also offer loans with no appraisal required and can close in 48 hours.

Express Capital Financing offers fix and flip loans for 1-4 unit non-owner occupied rental properties, with loan amounts of $100,000 up to $50 million. These loans can be closed within 5-7 days and are asset-based, meaning income verification is not required.

LendingOne can cover up to 90% of purchase and rehab costs, from $75,000 up to $10 million, and specializes in fix-and-flip lending that includes repair costs. They also offer options that can convert fix and flip loans to fix to rent (BRRR).

Real estate investors should consider factors like loan terms, interest rates, and fees when choosing a hard money lender.

Hard money loans come with a range of fees and costs that can significantly impact the overall cost of borrowing. These fees can include upfront costs, closing costs, and other charges.

The origination fee, also known as the upfront loan fee or points, can range from 1% to 5% of the amount borrowed. This fee covers the lender's costs, including buildings, employees, insurance, licensing, and systems.

Document preparation and underwriting fees can also apply, typically ranging from $500 to $5000, depending on the complexity of the loan. These fees cover the cost of preparing the loan and legal documents.

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Extension fees may also be charged if you need to extend the loan past the due date, with rates ranging from 1/4% to 1% per month. Some lenders may not charge extension fees, so it's essential to check and understand the terms.

To give you a better idea of the costs involved, here's a rough breakdown:

Keep in mind that these fees can add up quickly, so it's crucial to factor them into your overall borrowing costs.

Property insurance is a crucial aspect of securing a hard money loan. The lender will want to ensure there's sufficient insurance bound to the property to cover against fire, damage, or injury.

The cost of property insurance will vary based on the type of project, usage of the property, location, and property value. This cost will be paid to the borrower's insurance agent or company of their choice.

Pre-Payment Penalties can be a sneaky way for Hard Money lenders to reduce their origination fees.

Not all lenders charge Pre-Payment Penalties, so it's essential to be aware of your lender's policies.

If your lender does charge a Pre-Payment Penalty, you'll have to have the loan for a minimum set time or pay a minimum amount of interest, even if you pay off the loan early.

This means you'll be locked into the loan for a certain period, and paying off the loan before then can come with a hefty price tag.

Business cash advances are available to businesses with strong documented revenues, and some lenders can disburse funds within hours after approval.

These advances often come with a higher interest rate, so it's essential to understand the cost before accepting the funding.

Businesses should be aware that this type of funding is usually more expensive than traditional loans, but it can provide quick access to cash when needed.

Some business owners have reported that they can get approved for a business cash advance in as little as a few hours, which can be a lifesaver in urgent financial situations.

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