Typical Hard Money Loan Terms

[Nathaniel Wayman]

I have what seems to be a good deal that I hope to put under contract today. With that I am hoping to get a hard money loan to assist me in executing the acquisition and rehab. My question is what are typical terms for hard money lenders. I want to make sure I am not being  taken advantage of because of my lack of experience. 

- Do they require a down payment?

- What is a fair amount of points?

- What is a typical HM rate?

- Are the payments Interest Only?

Thank you in advance!

[Jonathan Taylor Smith]

Hello @Nathaniel Wayman - All HML are different, but those I've worked with do require some amount of down payment ("Skin In The Game") as a percentage of the purchase price (i.e. 20%) and then they fund the other 80% and 100% of the rehab. The broker or rep for the HML you are working with gets paid off the points, so it will be somewhere between 1 and 3 (more than that is a ripoff), and it will be higher on your first deal with them, and go down on each thereafter. I pay between 1 and 1.5 at this point.

Rates are often between 9% and 12% (lower may be possible and higher is a ripoff). I paid 9.5% on my most rent use of HM, and 11.5% on the first. I paid interest only payments for the 12 month term.

PM me if you'd like a referral to those I've used.