MATH TEST: Which hard money loan is cheapest???

[Andrew Bang]

Can you solve it?  Which hard money lender is cheapest for a flip? 

Scenario:  $150,000 total loan, 100k towards purchase price, 50k for rehab.   Flips the house in 120 days.  5 rehab draws, 1 every two weeks.  

Lender 1 : 12% simple interest.  1 point for loan origination.  no fee for processing, no rehab draw inspection fee.

Lender 2 : 10% simple interest. 2 points for loan origination. no fee for processing, no rehab draw inspection fee.

Lender 3: 8% dutch interest. 2 points for loan origination. $995 for processing, $150 per rehab draw inspection fee.

Constants:  no prepayment penalties, cash to close was the same for each lender. No appraisals, no credit checks.

[Jay Hinrichs]

going dutch is how the industry worked for many years.. not as common anymore as the lenders have gotten bigger and more sophisticated and have software programs that can do the math with a click.