Question regarding Commercial Loans

[Account Closed]

I have spent some time researching the types of deals I would like to to on BP. As all newbies go I guess our initial post goes something like this.

"Hi I'm new to investing really want to get started" we then receive responses that ask what we're interested in dealing in and what our long term goals are in which us newbies respond we want to wholesale and do some flips and move on to bigger and better.

Well during my initial posts I stated pretty much the same as mentioned above but after much research and deliberation I have decided that I would like to focus my market on MF and Apartments. With that being said I have started researching Commercial Hard Money Loans and Private lending sources.

I have a question regarding what many of the websites say; the statement "all commitment fees are paid at closing from the loan proceeds. " My question does this mean that the points being charged for the loan will be used from LTV loan at close?

[Jon Holdman]

Your best bet for getting an accurate answer is to call the lender. Commercial loans aren't as tightly regulated as residential loans, so there is much more variation.

I can speak to hard money loans, which are considered commercial loans. If the lender determines the value to be $100K, and the max LTV is 70%, your loan amount would be $70K. Say you were buying at $60K and had a $10K repair estimate. Also say there are four points ($2800) and another $2200 in various fees and closing costs. The repair amount is typically held by the lender. So, there will be a total of $75,000 needed to close the deal:
Purchase (to seller) $60,000
Repair escrow (held by lender) $10,000
Points (to lender) $2,800
Closing costs (to various people) $2,200
Total: $75,000

The loan is $70,000, so you would need to bring $5,000 of your own cash to closing.

I think the answer to your question is that the points have to be paid at closing, but the LTV and the value determine the loan amount. While not exactly accurate, you can think of the "net loan amount" as being the loan amount (i.e., what you have to pay back) less the points and other fees.