Interest Rates and Loan duration?

Question

Mark Fedorov · Answer

10-15%, the duration would be there estimate on the time of the project, max of 2 years, 1 year is more common.

If you are starting off new, you should be expecting to put more money down (30-50%), if you find a new Hard money lender you may get a lower rate, but don't expect anything close to a bank rate.

George Krajacic · Answer

I am the “old school” hard money lender but even old gizers change with time. Two years ago all my loans were around 12% with 1 to 2 years terms and 25% to 30 % down payments. Now the market is much more competitive and my investors will accept 8% to 11% return with terms up to 3 years and as low as 15% down payments, also on top of all that I will loan 100% of repair funds and I do not pull your credit repot or ask what your FICO is. Interest rates are mainly a function of the risk a lender is taking. So if one has larger down payment and or is experienced flipper interest will be lower.

Good luck,

George Krajacic

Gene Hacker · Answer

There are some HMLs in So Cal that loan in Bakersfield and have programs with rates under 10%.  There are a ton of lenders in So Cal and many have gotten pretty competitive.  Of course the rates are still dramatically higher than a mortgage from a bank but they are better than what they were 10 years ago.

Max Gradowitz · Answer

With hard money lenders, you aren't dealing with federal regulations and international large-scale economic competition.  Accordingly, hard money lender terms vary widely.  Asking "what terms should I expect" is hard to answer specifically, but there are a few good rules of thumb:

1. The "old school" hard money guys that I've worked with for years tend to want to go with the old school type of terms: 50% down, 15% interest rate, etc.  They are extremely flexible with terms: 1 year with balloon, 2 year with balloon, or even normal 20 or 30 year fixed.  Obviously, if you are using hard money to flip, you'll want the short term loans.

2. There is a new wave in recent years (I attribute this largely to the steadily growing post-recession economy of the last couple years) of what I call "hybrid" hard money lenders.  These are still hard money because they are privately funded, but they are funded with less risk (like 100 lenders will lend 1/100th on each loan) so they are able to offer terms that are closer to traditional conventional loans but still hard money.  Local hybrid private lender terms I've seen can go as low as 20% or 25% down payment and as low as 8 or 9 percent interest rate, and the better terms are given to those with better credit and doing less risky projects.

Good luck with your investing!  It's best to call around and ask some local hard money lenders what kind of terms they offer for what type of project you are looking to do.

Max

Shane Baganz · Answer

The better your fico, the better your rate.  If you have time, find your tri merge fico score and work to better it.

Mark is right about the percent down.  Some may let you in at 25% down, but your experience and fico will come into play.

Josh Mitchell · Answer

@Ashton Sharp anything is negotiable, but you should expect to pay a much high rate than base rates given through the banks. Typically HML are short term loans maybe 12-24 months depending on the lender and what the project consists of. Again, not a HML myself, but I would assume you would be in the 10-15% range depending on the lender you go with.

Interest Rates and Loan duration?

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