HML/Private Money Questions for 2018 .............

[Michael Dunn]

I'm leaning towards doing a HML ( will be my first )

I have read and understand the way in which HMLs are constructed and how they work in a general sense , but given t's now 2018 and since the last time I really considered using one , was 2 years ago, I'm not sure if the rules/regulations/Interest and Points have changed much 

Scenario:

The ARV on this property should come in at $130,000 given recent comparables

Repairs/Renovation costs  ( Materials Only )  ........ $20,000 

Assuming a 6 month HML at 15% Interest and 4 Points ( I'm using both of these on the higher ends ) ........... the total costs for the HML loan = $10,000 ( averaged out ) , and a LTV of 70%

So  $91,000 is what I have to work with  

My Questions please are:

1. Is 70% LTV what most HML lenders use ?

2. 6 month length of the Loan to complete the Renovations and Repairs ?

3. Once the Renovations are completed , do you just Refinance into a Conventional ( 80% LTV loan ) ?

4. Is there a " Penalty " if you complete the Renovations before 6 months and want to Refinance in say 4 Months vs 6 months ?

5. What are the Standard  Points ......... 2 ?  3 ?  4 ? 

6.  What about Interest Rates .......... 10% ?  12% ?  15%  ? 

7.  Will they allow you to do the Repairs yourself, so long as you can provide proof , that you know how to  ( Myself and my Father , both have 45 years+ between us ) 

8. Do they do a  " Draw "  as to how they give out the money for the Renovation costs ? 

9. Would I have to put up any Money Up Front , to get and qualify for the HML loan ............. or do they mainly loan , based soley on the Deal itself ?

10.  If the Property currently has a Lien on it , will they still loan on it , and just pay the Lien off , as soon as we close on the deal ?

11. How do they come up with an amount that they will loan on the Property BEFORE the work has even begun on the property , given that the property is currently Distressed and needs a full Renovation on it ? 

Thanks so much for the help , i really appreciate all of the help and replies 

[Aaron K.]

Okay that's a lot of questions but here we go

1. It depends on the area and the HML shop around

2. a lot of time the loan will be for 1 year with no prepayment penalty so if you finish in 6 months great you just saved yourself 6 months worth of interest.

3. If you are flipping no you sell the property and move on. If you are going for buy and hold you could but it might be easier to do conventional financing rather than using an HML in the first place.

4. See question 2 it will depend on the HML a no prepayment penalty policy is always best shop around.

5. Depends on your situation, experience and the HML but generally 2-4

6. See question 5 generally I've seen 7-12%

7. Depends on the HML some want a licensed contractor to do the work, but if you show them some of your previous jobs they might let you DIY

8. Yes most of the time they want to see progress being made in the rehab so they know you aren't wasting or pocketing their money.

9. Depends on the HML most want you to have at least some skin in the game but if you find a deal at a low enough price they might lend solely on the strength of the deal.

10.  Liens are just added cost that must be paid off when you buy so $5,000 lien equals $5,000 you have to pay above asking price to even get the property.

I typed too much and can't see the last question so I'll get it in a second post.